The threat posed by terrorism has clearly changed in recent years. Since the attacks in Europe in 2015 the evidence suggests that terrorists now prefer attacks involving knives, using vehicles as a weapon, firearms and increasingly IEDs. The desire to inflict physical damage has been less obvious. Attacks have resulted in a handful of property damage claims, although there have been significant non-damage business interruption (NDBI) losses. These have been caused by denial of access and loss of attraction.
More businesses may be exposed to this form of terrorism than previously. Businesses can be affected for days or even weeks as police cordons remain in place. More importantly as far as small businesses are concerned, attacks can depress trade in areas affected by terrorism for months after an incident.
How the 2017 London Bridge attack affected businesses
By way of example, the investigation into the 2017 London Bridge attack was accompanied by a 10-day police cordon around the area. Borough Market was closed, and the owners of its 153 stalls were prevented from accessing their premises.
Estimated losses were £1.4m at minimum. Few, if any, of the affected businesses are believed to have had terrorism cover.
How Pool Re have changed terrorism insurance
Pool Re, set up in cooperation with the UK government and the most significant providers of terrorism cover in the UK, have challenged standard cover.
The London Bridge attack, and the protection gap it highlighted, was the primary driver for the amendment to Reinsurance (Acts of Terrorism) Act 1993 provided by the Counter-terrorism and Border Security Bill which will enable Pool Re to offer non-damage Business Interruption (NDBI) cover.
Before the law was changed, Pool Re could only reinsure losses incurred if a company’s premises had been physically damaged by terrorists.
Pool Re included Non-Damage Business Interruption in its Scheme in February 2019 which will allow business to buy coverage that responds to the threat of contemporary terrorism.
Will more businesses be insured for terrorism-related non-damage business interruption?
The insurance industry has a responsibility to small business to ensure that there is an awareness of terrorism protection.
For Non-Damage Business Interruption cover to be successful it must be both affordable and accessible to small businesses – this is the responsibility of the insurance industry.
How does terrorism link to insurance industry findings of disaster recovery research?
There is a clear and obvious link between the terrorism gap and the British Insurance Broker’s Association’s (BIBA) attention on the lack of disaster planning and business continuity. A report from the Federation of Small Business revealed that two thirds of small businesses have been negatively impacted by a severe weather event in the past few years, and more than 185,000 business premises are at risk of flooding.
BIBA has recognised this in its 2019 Manifesto.
“…smaller businesses find it harder to recover from a shock than larger ones and therefore it is vital that they have a suitable insurance programme and business continuity plans as a safety net.”
SMEs are more vulnerable, have fewer resources, and are less prepared than large businesses, so need a more local, agile and cheaper solution. Worse, they often tender for business into larger companies, who increasingly require evidence that their supply chain will not be disrupted by a disaster event affecting the tenderer.
What does this mean for your vaping business?
It’s worth checking the details of your business insurance. If you have concerns about whether you have the right cover or appropriate sums insured, you could have a conversation with the team at Anthony Jones. They will be more than happy to go through it with you and make sure you are prepared for any event that might stop your business in its tracks.