One of the indirect consequences of the tragic events on and around London Bridge on 3rd June 2017, was the knock on effect to businesses within Borough Market.
The market was closed by the Police following the attack and did not reopen until 14th June. This led to businesses operating in the market submitting claims for Business Interruption to the tune of £1.4 million.
Businesses who had purchased additional Terrorism Cover would, no doubt, have expected a swift settlement of their claims. The reality was rather different as claims payments were held up while insurers waited for HM Treasury's certification of the incident as an act of Terrorism.
The certification didn’t occur until 28th June.
The Pool Re Scheme
Terrorism cover is provided by most UK insurers through the Pool Re scheme. Insurers pay a premium which is passed on to customers who wish to add the cover. It responds to losses resulting from damage to property caused by an act or acts of terrorism.
Pool Re issue their own Endorsement which insurers can use in their policies. Insurers are free to offer wider cover but unless the loss falls within the Pool Re wording no outwards recovery will be possible.
The definition of an Act of Terrorism used is taken from the Reinsurance (Acts of Terrorism) Act 1993 (see definition 2 overleaf).
"…acting on behalf of, or in connection with, any organisation which carries out activities directed towards the overthrowing or influencing, by force or violence, of Her Majesty’s government in the United Kingdom or any other government de jure or de facto."
The London Bridge attacks
The difficulty with this definition and, one suspects, the reason for the delay in certification by HM Treasury, may be the requirement that the act of terrorism be "on behalf of or in connection with any organisation".
In the case of the London Bridge attacks, the three perpetrators' links to known terrorist groups is unclear. Salman Abedi, the Manchester Bomber, had a network of associates known to security services and a family who supported Al Qaeda affiliated groups. There were no delays in certification of that act.
The question arises whether three individuals who get together and perpetrate an attack inspired by such terrorist organisations is acting "on behalf of or in connection" with them.
HM Treasury's guidance on the point is unhelpful. It accepts that an act carried out by a "sympathiser" would not exclude it from the definition. However, it also says that the "mere fact of sharing an organisation’s objectives is unlikely to be sufficient. There would probably have to be something additional to connect the act to a specific organisation".
Quite what this "something additional" could be is not clear, and there the guidance ends.
It leaves insurers in an unenviable position. Either they respond to their customers' claims in a timely fashion and run the risk that any payment may not ultimately be recoverable from Pool Re or they wait on certification from HM Treasury, fuelling negative publicity for the industry whilst some of their customers' businesses may be hanging by a thread.
The Pool Re Scheme
Eligible Property: Commercial property only (see definition below) located in England, Scotland and Wales.
Cover Provided: All risks cover for damage to commercial property and resultant business interruption losses caused by an Act of Terrorism. Property must be insured under a commercial property policy with cover for conventional fire and explosion risks. All general terms and conditions will apply to Terrorism cover.
Exclusions: i) War and related risks; and ii) Damage caused by virus, hacking or similar actions.
- Property means all property whatsoever, but excluding… (a) Any land or building which is occupied as a private residence or any part thereof which is so occupied, unless (i) insured under the same contract of insurance as the remainder of the building which is not a private residence or (ii) not insured in the name of an individual.
- Act of Terrorism means acts of persons acting on behalf of, or in connection with, any organisation which carries out activities directed towards the overthrowing or influencing, by force or violence, of Her Majesty's government in the United Kingdom or any other government de jure or de facto.
- Certified means formal confirmation from HM Treasury that an Act(s) of Terrorism has occurred within Great Britain.