I am an Insurance Broker – a recent one at that having spent 29 years working with an insurer. Someone asked me how it felt to be a gamekeeper turned poacher and it struck me that there was still a feeling of “us and them” within the industry that I love. Regardless of the accuracy or otherwise of this statement it has always been a huge motivation for me to seek collaboration in finding solutions to commercial insurance buyers beyond price and cover and how much to charge for the service. So, it was with great interest that I started to seek to understand the fresh thinking of Pool Re towards the SME community and the links to BIBA’s focus on risks and opportunities for UK businesses around disaster recovery.
How terrorism risk to business is changing
The terrorist threat landscape has clearly changed since the attacks in Europe in 2015 and terrorists’ preferred attack methodologies now involve knives, using vehicles as a weapon, firearms and increasingly IEDs. The desire to inflict clear and obvious physical damage has been less obvious – a handful of property damage claims but significant non-damage business interruption (NDBI) losses caused by denial of access and loss of attraction.
More businesses may be exposed to this form of terrorism than previously. Businesses can be affected for days or weeks as police cordons are in place. Moreover, attacks can depress trade in areas affected by terrorism for months after an incident.
The 2017 London Bridge attack effect on business
By way of example, the investigation into the 2017 London Bridge attack was accompanied by a 10-day police cordon around the area. Borough Market was closed, and the owners of its 153 stalls were prevented from accessing their premises.
Estimated losses were £1.4m at minimum. Few, if any, of the affected businesses are believed to have had terrorism cover.
How Pool Re have changed terrorism insurance
Pool Re, set up in cooperation with the UK government and the most significant providers of terrorism cover in the UK, have challenged standard cover.
The London Bridge attack, and the protection gap it highlighted, was the primary driver for the amendment to Reinsurance (Acts of Terrorism) Act 1993 provided by the Counter-terrorism and Border Security Bill which will enable Pool Re to offer non-damage Business Interruption (NDBI) cover.
Before the law was changed, Pool Re could only reinsure losses incurred if a company’s premises had been physically damaged by terrorists.
Pool Re included Non-Damage Business Interruption in its Scheme in February 2019 which will allow business to buy coverage that responds to the threat of contemporary terrorism.
Will more businesses be insured for terrorism-related non-damage business interruption?
The insurance industry has a responsibility to small business to ensure that there is an awareness of terrorism protection.
For Non-Damage Business Interruption cover to be successful it must be both affordable and accessible to small businesses – this is the responsibility of the industry.
How does terrorism link to BIBA and their disaster recovery findings?
There is a clear and obvious link between the terrorism gap and BIBA’s attention on the lack of disaster planning and business continuity. A report from the Federation of Small Business revealed that two thirds of small businesses have been negatively impacted by a severe weather event in the past few years, and more than 185,000 business premises are at risk of flooding.
BIBA has recognised this in its 2019 Manifesto.
“…smaller businesses find it harder to recover from a shock than larger ones and therefore it is vital that they have a suitable insurance programme and business continuity plans as a safety net.”
SMEs are more vulnerable, have fewer resources, and are less prepared than large businesses, so need a more local, agile and cheaper solution. Worse, they often tender for business into larger companies, who increasingly require evidence that their supply chain will not be disrupted by a disaster event affecting the tenderer.
What happens next?
I look forward to BIBA’s new terrorism insurance guide to assist the market in helping customers make conscious buying decisions and a better understanding of pricing and access to solutions.
I welcome those insurers and brokers willing and able to add meaningful value to propositions in the area of disaster planning.
Steve Green
Director
Anthony Jones Insurance Brokers
April 2019
