It is a sad fact of life that the market for insuring against terror attacks is rapidly growing. Generally, cover against terror is not included as standard by most UK commercial property insurers. After the Baltic Exchange Bomb in 1992, there was a considerable period where in fact no insurers offered it at all, leading to the establishment of the Pool Reinsurance Company. Known as Pool Re, this reinsurer is guaranteed by the Government means that policyholders will always be able to recover any loss resulting from damage to their property caused by terror, from Pool Re itself or the Government. The premiums are assessed using a similar model used to estimate natural disaster risks on more common insurance policies.
Before the Counter-Terrorism and Border Security Act 2019 it was, therefore, the situation that, in the event of a terrorist incident, businesses would only be able to claim against their insurance for the tangible damage done to their physical property. There was, for most, no way to claim for the loss of custom that may naturally occur in the wake of such an attack. This meant that following tragic events such as the Manchester Arena bombing, the reluctance of many non-Mancunians to visit the city led to several small businesses struggling without recourse from their insurer. This was due to many insurance companies refusing to offer policies covering this due to the high levels of risk, not least because they would not be able to recover any payout themselves from the Government.
Following the legislation’s enactment, however, more insurers will have the power to offer stronger protections to commercial property owners affected by such events. The foremost of these is to allow Pool Re to pay out for losses that come about as the result of a terror attack, that isn’t necessarily linked to physical damage to the shop, warehouse or property. In the insurance sector, this is known as ‘non-damage business interruption’ cover.
Pool Re, with government backing, will now (in simple terms) insure the insurers. This means that a larger number of insurers will likely offer this kind of insurance as the risk in doing so is significantly reduced, due to them being able to recover some of the value of any claim from Pool Re. This gives commercial property owners a further level of protection to both their property and their business and ensures that whilst the emotional and physical effect of terror attacks often cannot be