Terrorism Risk Insurance

Awareness of terrorism risk has increased significantly in recent years, leading many businesses to review their insurance arrangements. It's also become harder to predict when and where the next terrorism incident will happen. The scope of terrorism insurance coverage varies between insurers, making it important to choose the right policy. At Park Insurance, we can help.

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What is terrorism insurance, and why is it important?

Terrorism insurance is specialised protection that covers financial losses caused by acts of terrorism. It protects your physical assets, allowing you to make repairs without affecting your finances. These losses are usually excluded from standard commercial and home insurance policies. When considering adding terrorism risk insurance to your package, it’s useful to consider the risk exposure you face, what level of financial protection you feel you need, and if you’re taking out coverage for a business, your legal and operational obligations.

Terrorism cover may influence certain liability insurance policies, especially if you operate in high-risk areas.

What does terrorism insurance cover?

Taking out a dedicated policy (or adding a clause to your existing property or business interruption insurance portfolio) means that you can claim compensation if a terrorist act causes:

  • Property damage
  • Business interruption
  • Contingent interruption — This provides financial cover for losses if suppliers or customers are affected by a terror incident
  • Liability claims — Certain policies may include liability cover arising from terrorism, depending on the insurer and the policy wording. This may provide financial cover if third parties bring claims against you related to a terror event (for example, if your business has to stop operating temporarily due to a terrorist attack and you are unable to fulfil contracts or orders)
  • Cyber terrorism – Some insurers also offer cover for cyber terrorism, although this is often provided as an optional extension or under a separate cyber policy.

Are particular industries more at risk than others?

It’s important to consider both damage and non-damage terrorism impact (for example, structural damage to a property or cyber damage to a business system. Historically, particular industries and locations that are more at risk include:

  • High-profile retail targets such as busy shopping centres, famous locations such as Oxford Street in London, and flagship stores
  • Hospitality and entertainment venues, including nightclubs, arenas that attract large crowds, sports stadiums and hotels
  • Transport and logistics hubs
  • Financial institutions
  • Energy and power suppliers
  • Military bases

Cyberterrorism has also opened up the possibility of everyone from multi-national corporations and international finance operations to SMEs and even sole traders becoming the victims of a terrorist attack. If a cyberattack is associated with a particular cause or attacks are carried out by known terrorist groups, your terrorism insurance coverage may help you restore your business operations and get your company moving again.

Pool Re - The industry's response

In 1993, the insurance industry, in conjunction with the UK government, set up Pool Re (Pool Reinsurance). Pool Re is what is known as a mutual reinsurer made up of both insurance providers and Lloyd's Syndicates. They offer commercial customers insurance that covers losses that are a direct result of terrorist acts; claims are handled by your insurer, which may in turn be reinsured through Pool Re.

At Park Insurance, we recognise just how worrying the thought of a terrorist act can be, especially for those living in 'high-risk' target areas such as the centre of major cities or near strategically important sites. We work with you to provide cover that is both proportional to the level of risk and competitively priced.

What isn't covered

Unless specifically stated as part of a war and terrorism insurance policy, acts of war, including damage resulting from invasion, foreign hostilities, or military action, are generally not covered. Non-terror political violence, such as riots or civil unrest are also not covered unless specifically added. Other exclusions include:

  • Acts that do not meet the legal definition of terrorism – for example, if an incident is violent but not carried out to advance a political, religious, racial, or ideological cause, it may not qualify as terrorism.
  • Losses outside the insured geographic area
  • Nuclear, chemical, biological, radiological (NCBR) attacks – although this can depend on the policy and insurer
  • Losses from government seizure or confiscation
  • Cyberattacks that are not classified as terrorism
  • Losses caused by failure to comply with legal security duties
  • Losses where terrorism is only an indirect factor and excluded elsewhere
  • Damage to property not insured under the policy

How much does it cost?

The cost of your terrorism insurance coverage will depend on several factors, including whether you fall into any of the designated high-risk industry categories, your location, your risk level, and the level of cover you want to take out. Your broker can help you find competitively priced terrorism risk insurance that meets both your needs and your budget.

What types of businesses should consider this type of insurance?

If your business falls into a high-risk category or your operations may put you at risk of a terrorist attack, you should consider terrorism coverage, regardless of the size of your operation.

Is terrorism insurance required by law?

No, but in an increasingly high-risk world, it is certainly worth considering if you feel your business may be at risk of attack. Note that certain landlords, lenders or commercial contracts may require terrorism risk insurance.

Keeping your business safe with Park Insurance

For over 30 years, Park Insurance has been providing specialist insurance to businesses. Our position as preferred broker to some of the UK’s largest insurance providers puts us in a unique position to source competitively priced cover that suits your needs. Our expert brokers can advise you whether terrorism insurance should be part of your package. Call us direct, or use our online form for an instant, no-obligation quote. Contact us today.

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Give us a call on 0117 301 8507 or click on the button below and we will be happy to contact you to discuss your needs.

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