Since Gary Barlow, terrorism underwriting manager at NMU, last discussed the changes to the terrorism insurance sector with Insurance Business in December of 2019, the world has become a markedly different place. The financial difficulties facing many businesses and individuals due to the COVID-19 pandemic and the ever-shifting lockdown are causing balance sheets and budgets to come under heavy scrutiny and the pressing concern is that this could lead to businesses cutting or reducing essential coverage.
“We’re finding at the moment there are less SME clients actually asking for terrorism cover which is quite concerning because they would potentially suffer the greatest from the short-term economic impact of the type of terrorist incidents that we’re seeing,” he said.
As widely publicised in the media, he said, there is still a genuine and viable concern regarding terrorism threats in the UK, as evidenced by the fact that, within weeks of the total UK lockdown lifting in the middle of June, the Forbury Gardens attack occurred. NMU did not expect to see a claim submitted as a result of this incident, Barlow noted, but a commercial client who was located close to the park was affected by denial of access to the retail park. The incident had a real impact on the area in the weeks that followed and, for the client who had only been open for about two weeks following the lockdown when the attack occurred, the cover proved to be of significant value.
The nature of such attacks, which are unsophisticated and involve the use of a handheld weapon and no great degree of planning and preparation, is another challenge for security services. As such, brokers need to be engaging with their clients on the subject of terrorism insurance, Barlow noted, and the days should be gone from when brokers were simply asking a ‘yes’ or ‘no’ question regarding take-up.
“I feel that brokers should continue to have conversations with their clients, highlighting the type of terrorist events that could occur and not necessarily directly impact their premises or their buildings, but could still have detrimental economic effects,” he said.
With clients and brokers concerned about the costs of purchasing terrorism cover due to the increased financial pressures of the pandemic, Barlow believes that the value of the standalone terrorism market has come to the fore. As a standalone insurer, he said, NMU is able to offer a flexible underwriting approach and a range of solutions and pricing models which make its coverage more reflective of the individual requirements of the insured.
Being able to offer flexible and cost-effective solutions has allowed NMU to evolve its product offerings, he said, which has led to the development of its new property owners wording for commercial and residential properties. The standard terrorism property owners cover offered by NMU now includes the same non-property damage trigger of the denial of access wording that exists within its terrorism offering for commercial business.
Barlow added: “With the country terrorism threat level now at severe and at its second-highest, meaning an attack is highly likely, clients that hadn’t traditionally felt terrorism cover to be a critical need for them, are now realising that they should seriously consider the financial impact of remaining uninsured.
“It is critical for businesses to consider the potential of indirect risks following terrorism incidents that are outside of their control, for example, denial of access to their property due to a police cordon, and the immediate and knock-on effect to their business and tenants.”
The most important takeaway when it comes to examining the terrorism insurance sector, Barlow noted, is that businesses and properties should have some degree of protection rather than none at all - and that there are several options out there which can fit the variable requirements of any insured.
