Posted on June 26, 2014
Insurance cover for terrorist acts is excluded from property owners insurance policies and purchased separately. The history of Terrorism insurance in the UK goes back to the IRA campaign of the early 1990’s. In 1992 UK insurers stopped providing terrorism cover on commercial property following the bombing at the Baltic Exchange in Bishopsgate. Residential policies were unaffected.
In order to fill the void in cover, the UK Government, in conjunction with the insurance industry, set up Pool Re in 1993. This is a scheme where premiums are pooled and held in anticipation of a claim being made following terrorist activity. The Government backs the scheme and will honour any valid claims on the understanding that any shortfall will be paid by future premiums.
The face of terrorism has changed over the intervening years following the set up of Pool Re and the perceived risk now is not primarily from the IRA but from various other groups, including Islamic militants, particularly since the events of 11th September 2001.
Lenders generally require terrorism insurance to be purchased as a condition of their facilities agreements and this has, in recent years, been purchased via the insurance providers from Pool Re.
The Pool Re system requires that, if a property owner owns several properties and requires cover for one or more of them – he must purchase cover for them all – this was intended by Pool Re to ensure an adequate premium pot by the non-selection principal. It means, however, that property owners are obliged to insure properties with little or no terrorism risk if they need cover for the high risk city centre properties.
As previously noted, there is still a risk of terrorism acts occurring in the UK at any time. It remains the case, however, that despite there being no claims made on Pool Re, the rates charged have not reduced and there is still no flexibility in the choice of properties to insure.
Pii have been working closely with the Lloyd’s of London market in order to provide a flexible and cost effective solution to property owners who are able to be flexible on their terrorism purchase. We now have an online facility via which we can obtain quotes and bind cover with the Lloyd’s market. The main features and benefits of this cover are shown below.
- Property owners can insure all, or only a selected part of a portfolio.
- The insured can select the policy limit up to a limit of £15 million per location in the UK.
- Threat cover is included.
- Cover includes Nuclear, Chemical, Bilological and Radiation cover (dirty bomb cover).
- Interest free Direct Debit premium payment to the insurer is available.
- Minimum Policy premium is £50.
All of the above features would, of course, be subject to approval by lenders.