The terrorism re/insurance model needs to evolve in line with changing threats after the 2017 attacks in the UK showed gaps in business interruption (BI) cover and the potential vulnerability of motor insurers to terror threats, Pool Re Chief Executive Officer (CEO), Julian Enoizi told Bloomberg in an interview.
After this year brought a string of so-called lone-wolf terror attacks and increasing cyber crime, insurers and reinsurers are tasked with reassessing and adapting policies to keep up with the latest forms of terror risk.
The CEO of the UK’s government-backed mutual terrorism reinsurer called attention to existing gaps in BI cover – where the risk doesn’t come from physical damage, so firms could recover from more indirect losses to profit related to terror events.
The vehicle attacks on Westminster Bridge and London Bridge highlighted the potential vulnerability of motor insurers to terror attacks, who may also have to adapt since current policies provide unlimited cover – meaning insurers could be liable for massive payouts.
Enoizi said regional inequalities in the terror protection gap, which is bigger in regions beyond the capital, is another issue that needs to be addressed by the industry – risk transfer to re/insurers provides valuable benefits by helping to protect local government’s balance sheets – which areas outside of London could stand to lose out on.
This year’s most costly attack in the U.K. so far is expected to come from damage to the Manchester concert hall and BI from a nearby train station having to be shut down – lack of terror cover could leave businesses struggling in the face of a future attack.
“The Westminster, Manchester and London Bridge attacks all resulted in claims for Pool Re,” Enoizi told Bloomberg. “It’s still too early to tell how large these will be. We are still receiving claims,” he continued.
With one of the fastest-changing and most unpredictable threats, terrorism re/insurers are tasked with the challenge of constantly evolving, or risk having to face a loss of relevance.
