Terrorism Insurance and Risk Management
Business Interruption Extensions
Events last year in London, Leeds and Birmingham have shown that businesses can suffer a loss even where their own property is not damaged by such events. Norwich Union have 3 Business Interruption extensions available that could provide valuable cover for future incidents of this nature:
Prevention of Access
This is a traditional BI extension which provides cover for businesses, where access to the Premises is prevented due to damage to third party property in the vicinity of the Premises.
There must be actual damage to the third party property for this extension to operate and access to the policy holders premises must be physically prevented. For example, a security alert would not be covered and neither would a reduction in customers due to fear.
The policy Terrorism exclusion would apply to this extension and in the event of the Treasury certifying an event as an Act of Terrorism, only those policyholders who had purchased Pool Re Terrorism cover would be able to make claims under the Prevention of Access extension.
Loss of Attraction.
This extension provides cover for businesses who operate in the vicinity of a major attraction, e.g. a retailer adjacent to a Theatre or Cinema. Damage at the attraction is likely to reduce the number of customers at the policyholders premises, irrespective of whether access is prevented or not. The extension provides cover on this basis.
The position in respect of an Act of Terrorism is as detailed in the Prevention of Access extension above, and only those policyholders who purchased Pool Re Terrorism cover would have insurance protection if such an event occurred.
Cover is normally available up to the full BI sum insured and no standard excess or franchise is applied.
Police Action
This extension provides cover for businesses that are closed or customers are prevented from visiting the premises by the Police due to a danger or disturbance in the area. This is a "non-damage" extension and only applies where no actual damage has occurred.
The cover provided by this extension is in respect of any potential danger or disturbance which prevents access to the premises and would include bomb hoaxes and unexploded bombs. Only if a bomb exploded would this cover not apply.
Once actual damage occurs, then this cover no longer applies, but cover may apply under the standard BI policy cover, another BI extension (for example, Prevention of Access or Loss of Attraction) or perhaps under the Pool Re Terrorism cover, depending on the nature of the damage.
The BI Terrorism exception does not apply in respect of bomb hoaxes or unexploded bombs, so this cover would remain in force even if it was known that a Terrorist group was involved. As mentioned above, only in the event of actual damage would the BI Terrorism exception be relevant and this may apply depending on the circumstances of the event causing such damage.
In view of the potential for a series of bomb hoaxes in certain areas, cover is limited under many Norwich Union policies to 10% of the BI sum insured, or £100,000 (whichever is the lesser amount) in any one period of insurance cover. In addition, a franchise period - normally 12 hours - applies, although for some package covers, the limit and franchise period may differ from these.
