A recent AIRMIC/Association of British Insurers (ABI) survey suggests that the lack of suitable insurance cover against terrorism could cripple UK businesses. If current capacity to insure liabilities was reduced, companies would be forced to drastically alter their business practice; certain sectors might cease trading altogether.
If public liability cover for terrorism was not available, some risk managers said they would advise their companies to relocate from urban areas. Most said it would impact negatively on overseas investment in the UK.
Respondents claimed that limiting employers liability cover to £5m per event would undermine general business practice since many businesses have far higher potential exposure. There was a similar response to a scenario in which motor policies were limited to £250,000 per event for third party cover.
“For risk managers already faced with a hard insurance market and heavily increased renewal premiums in many sectors following the September 11 terrorist attacks, the thought of any further restrictions or reductions in terrorism insurance cover is anathema,” said David Gamble, AIRMIC executive director. “Additional and widespread insurance cover at acceptable rates will not remove the terrorism risk, but it will help UK businesses to operate with certainty and a confidence in their future. AIRMIC, along with the ABI, will be urging the government to assist further in providing a long-term answer to the risk management problem of terrorism.
Several respondents said that lack of cover might put companies in breach of industry trading regulations or would contravene financial loan covenants. Last September, the UK airline industry faced worldwide grounding of fleets through lack of insurance until the goernment stepped in to underwrite the risk. This arrangement is due for reconsideration in March.
John Parker, ABI head of general insurance, commented: “The results of this survey underline the need for the insurance industry and government to build on the solid achievements of Pool Re. This is a good example of the public and private sectors working effectively together. By extending its remit, we can ensure that insurancee is available to British companies to cover the risks of terrorist acts.
