UK's Pool Re approved to cover non-damage terror losses

UK terrorism mutual reinsurer Pool Re has received Parliamentary approval to cover non-damage business interruption losses in the wake of a terrorist attack.

The Counter-Terrorism and Border Security Bill 2018 has been granted Royal Assent, allowing Pool Re to provide, for the first time, insurance cover for businesses that suffer losses as a result of acts of terrorism even though their own premises have not been physically damaged.

Before the law was changed, Pool Re could only reinsure losses incurred if a company’s premises had been physically damaged by terrorists.

The gap in insurance coverage was highlighted in the 2017 attacks on Manchester and London Bridge, where small and medium-sized businesses were shown to be particularly vulnerable with several caught behind police cordons or experiencing a reduction in footfall following the events. They suffered significant business interruption losses for which they could not be compensated, either because they had not purchased terrorism insurance, or because the cover excluded business interruption if their premises had not been damaged.

“Today’s amendment changes that,” said Pool Re’s chief executive, Julian Enoizi. “We have worked very closely with the government, and with the industry since it opted to mutualise the non-damage risk in 2017. Perhaps more importantly, we are already collaborating with business federations, local authorities, brokers and our member insurers, all of whom need to have open conversations with their customers about just how much may depend on having this cover if the worst should happen.”

The British Insurance Brokers Association (BIBA) has welcomed the move, saying that the changes contained in the act will help businesses and increase resilience.

Graeme Trudgill, BIBA executive director said: “The changing nature of the risk terrorism over recent years highlighted the need for reform in regard to terrorism cover for business interruption insurance. This legislation is something BIBA has campaigned for with the support of our members, Pool Re itself and MPs including Neil Coyle MP whose constituency includes Borough Market which was badly affected by an attack in 2017.”

Trudgill said the changing nature of terrorism is leaving businesses exposed, adding: "We also recognise the need to encourage more small businesses to buy any kind of terrorism cover as fewer than 3 percent of SMEs take up any cover at all and we will in conjunction with Pool Re be delivering a guide to help businesses understand their risks and helping brokers to access insurance for their clients.”

Pool Re has paid hundreds of millions in claims over its 25-year history at no cost to the taxpayer. The latest amendment makes the UK’s terrorism reinsurance pool the first in the world to extend its cover to include non-damage business interruption losses.

Pool Re’s CUO Steve Coates, said: “It’s the sad reality that business-owners across the country now have a new set of perils that threaten their livelihoods. This amendment is a real turning-point for our industry’s ability to deliver the comprehensive protection businesses have been waiting for, but they’ve got to make the jump and buy the policy, and we have worked hard to make the new cover as accessible and affordable as possible. I would encourage any business owner to speak to their insurer or broker about what their current policy includes, and ensure it is extended to deal with terrorist threats.”

John Glen MP, economic secretary to the Treasury, commented: “We will not allow terrorists to change our way of life. So when businesses raised their concerns about a gap in insurance cover following a terror attack, we worked with Pool Re to come up with a solution. Today, we’ve changed the law to give businesses peace of mind, helping them to insure themselves against financial loss as a result of a terrorist attack, even if there is no physical damage to their property. This means businesses will be able take out new and comprehensive policies to protect them in the future.”

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