We are all now so aware of the fact that terrorism can strike anywhere at any time. The recent appalling attacks in and around Borough Market – which is a wonderful place to visit – were just the latest in a growing list of horrific random acts in unlikely places.
Following the attacks, Borough Market was closed for 10 days, which caused large losses for the traders. According to a recent report in the Financial Times, it would seem that many of them won’t be able to claim on their business insurance as, under current systems, economic damage caused by terrorism is usually excluded from standard small business insurance policies. Larger businesses can buy separate terrorism insurance, but for historical reasons this probably won’t cover the consequences of these attacks.
It all goes back to the IRA bombing of the Baltic Exchange and other events in the early 1990s. At that time, re-insurers withdrew support for cover for terrorism-related damage, which led to the insurance industry and the government of the time forming Pool Re. This currently underwrites insurance cover for commercial property if it is hit by terrorist attacks.
That’s the problem: it only covers damage to property and not business interruption. And as we have seen, recent terrorist attacks are far less likely to target buildings than those carried out in the 1980s and 1990s.
So there are now calls for Pool Re to be expanded to cover business interruption. According to the FT, talks have already begun between the Treasury and Pool Re, to respond to the ‘evolving nature of the terrorism threat’. We will follow developments and report back.