Terrorism is not new, but the frequency, audacity and geographical reach of terrorist attacks have noticeably increased in recent years. Understandably, business owners, risk managers and insurers are concerned with mitigating the risks posed by increasingly prevalent, damaging and random terrorist attacks.
Because losses, costs, damages and expenses from terrorism are typically excluded from standard commercial insurance policies, terrorism cover must either be added on as an extension or purchased as a stand-alone policy. By adding terrorism cover to your policies, you can protect your business from this ever-growing set of hazards.
What is Terrorism?
The complexity of terrorism insurance usually arises from the discrepancy between the actual definitions of terrorism. In the United Kingdom, both the Reinsurance (Acts of Terrorism) Act 1993 and the Terrorism Act 2000 have their own statutory definitions of terrorism. Different insurers also have their own definitions of terrorism, which can lead to confusion and gaps in cover. As a result, some insurers offer terrorism ‘gap’ cover.
A typical insurer defines terrorism as an act:
- That includes but is not limited to the use of force, violence or threats on any person or group of persons.
- Made by someone working alone or on the behalf of or in connection to any organisation or government.
- Committed for political, religious, ideological or similar purposes, including the intention to influence any government and or to put any section of the public in fear.
Because terrorism cover is offered on an ‘all-risks’ basis, policies will generally name specific exclusions. Common exclusions include:
- Losses sustained from war
- Losses sustained from digital and cyber risks
- Losses sustained from strikes, riots and civil unrest
- Certain properties, including those located on licensed nuclear sites and those insured under marine, aviation or motor policies
Terrorism creates numerous liability risks, including public liability and employers’ liability concerns.
Because terrorist acts happen unexpectedly and can cause untold damage, businesses with inadequate public liability cover are particularly vulnerable. If a business is found liable for third-party injury as a result of a terrorist attack, that business may have to cover huge losses. This liability generally applies to property located in congested, urban areas or near potential terrorist targets where many people could be affected by a single attack.
Inadequate employers’ liability is also a concern. Many employers opt for the minimum employers’ liability amount of £5 million, but losses resulting from terrorist action can easily exceed the required minimum. Particularly vulnerable businesses, such as those with a high concentration of employees in a single urban environment, are thus potentially under insured.
To ensure you are prepared to ease potential losses due to terrorism, contact BC Underwriting today at 01444 810 444 to learn more about the options for insuring your business.