After a spate of terrorist attacks in public places across Europe in the past year, it is more important than ever before that operators are prepared for the worst. John O’Hara of Finch Insurance discusses the steps all operators should be taking to think the unthinkable
There are certain risks that none of us want to imagine but is your business prepared for a terrorist attack? High-profile atrocities over the past few years have had particular resonance for the hospitality sector as terrorists have targeted restaurants, music venues and shopping centres.
Sadly, the threat of these kind of attacks is a reality that we will have to live with. The spectre of those terrible scenes from the 2005 London tube bombings still haunt the country, but from anecdotal evidence it appears that not everyone has a plan in place should the unthinkable happen.
Why should this be? What business has not protected itself again flooding, fire, theft? All deeply unpleasant experiences that can leave a company devastated, but for some reason it seems that terrorism is not yet thought of as such an obvious area to seek protection.
While it’s important not to underestimate the importance of preparing for the worst, let’s not pretend that the UK is a stranger to terrorism.
Even back in the 1970s and 1980s, hos-pitality was a prime target for terrorism, in this case in the form of the IRA. The Birmingham pub bombings, the police officer killed trying to diffuse an explosive in a branch of Wimpy’s and Brighton’s iconic Grand Hotel ripped open by a blast are among the darkest memories of those times.
The difference between that period and the modern day landscape is that terrorist attacks are now generally launched without warning and with the intention of shaking our belief in every aspect of our day-to-day life. The telephoned warnings of an imminent attack are a thing of the past.
While the very nature of these shock tactics makes it almost impossible to prepare yourself, there are steps a business can take.
Government guarantees
In the UK, following the Baltic Exchange bomb in 1992, all UK insurers stopped including terrorism cover on their commercial insurance policies with effect from 1 January 1993 (home insurance policies were unaffected). As a consequence, the Government and insurance industry established the Pool Reinsurance Company Ltd (Pool Re). Primarily funded by premiums paid by policyholders, the Government guarantees the fund although any such support must be repaid from future pre-miums. To date, despite paying over £600m in relation to 13 separate claims, no Government support has been necessary.
The first thing to think about when looking at terrorism cover is the definition of the word.
The Terrorism Act defines it as “the calculated use of violence (or threat of violence) against civilians in order to attain goals that are political, religious or ideological in nature”.
Terrorism cover is excluded under a commercial policy unless the terrorism extension is added, which defines it as “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 UK or any government in fact or by law”.
PoolRE remains the widest cover available on the market as it acts as an extended peril under the main policy but there are also a number of insurers and markets offering standalone insurance policies. However, it must be remembered that policies purchased separately are more restrictive in nature and relate only to direct damage.
There are several additions an operator would probably want to think about including in their cover, depending on the nature of their business. The first is ‘Loss of Attraction’. This would protect a business in the event of an incident off site causing damage to property within a specified radius causing footfall to reduce and a reduction in your sales. ‘Denial of Access’ is caused by damage at premises in your vicinity which prevents or hinders use of the premises. In both cases the radius would be specified and would usually be one or two miles.
However, there would have to be evidence that some genuine damage had been caused. ‘Non-damage Denial of Access’ refers to the use of the premises being denied or hindered following closure of the area due to an incident likely to en-danger human life or property. There is usually a time excess associated with this.With each of the key cover enhancements a limit will be applied and it is important to review and check it is adequate.
A feature of many recent terrorist attacks has been the ‘Lone Wolf’ approach rather than a co-ordinated assault by various parties. It is likely that a Lone Wolf attack would meet the criteria for terrorism as, if it was a calculated act, it would be politically, religiously or ideologically motivated. However, the difficulty again comes down to interpretation of damage. If, for example someone were to run through a shopping centre with a knife, it would undoubtedly unsettle customers, but if no-one was hurt or damage caused, it may be difficult to justify a claim.
Being prepared
In terms of the steps a businesses can take in making sure its house is in order re terrorism cover, it can be summed in the boy scout classic of being prepared. Companies should already be doing risk assessments as a matter of good practice. The key thing is to look at the vulnerability of your staff. The nightmare scenario for any operator is that their employees are caught up in an attack. There are additions you can buy to your cover, which include specific clauses for kidnap and ransom, which gives you access to skilled negotiators.
There should be a disaster plan in place and unfortunately terrorism should be as much a part of that as fire or floods. If you operate in a shopping centre or as part of a prominent retail centre, your landlord is likely to be well aware of the obligations for protection against terrorism, so it would be a good idea to speak to him or her.
From my conversations with finance directors across the sector it is clear that the threat of terrorism and the need to be prepared is rising up the agenda. But I fear there are still too many operators who think they don’t need to worry. Unfortunately, the days when terrorism was a concern only for those operating in high-profile locations in central London are over. Hopefully it will never touch your life or your business, but please don’t take the chance.
■ John O’Hara is account director at Finch Insurance Brokers
