Access to terrorism insurance for households and businesses

The protection gap in household and business terrorism insurance

A chemical, biological, radiological or nuclear (CBRN) event can render an area uninhabitable, either during a shorter-period clean-up or for a period of years. 

A shopkeeper buying commercial terrorism cover via their broker can obtain relevant cover in which contamination is considered to constitute damage to affected premises. However, for a householder of a flat above the shop accessing suitable CBRN cover is almost impossible. 

This is because of a blanket exclusion in home insurers’ policies that states for example:

“We will not pay for any claim arising directly or indirectly from an act of terrorism. In this case, an act of terrorism means preparing, threatening to use or actually using any item capable of producing biological, chemical or nuclear pollution or contamination.”

In the event of a CBRN incident, households could face indefinite periods in alternative accommodation, losing  their home without compensation and mortgage default which could then potentially present a systemic exposure to the banks. 

Businesses can be covered for CBRN risks through the Government backed Pool Reinsurance Company (Pool Re). BIBA believes that the potential for this cover to be extended to home insurance using Pool Re’s established structure, so closing another gap in terrorism cover, should be examined.

CALL FOR ACTION

For stakeholders, including the insurance industry, Government and Pool Re to recognise the terrorism protection gap for ordinary householders and to work together to develop constructive solutions.

“BIBA is right to raise awareness of this gap in cover and we look forward to discussing potential ways forward with the industry.”

JULIAN ENOIZI  

CEO, Pool Re

Commercial terrorism cover – non-damage business interruption

Despite the fact that the Counter Terrorism and Border Security Act was introduced in 2019 many leading insurers have not yet updated their policy wordings to include terrorism non-damage business interruption cover (including CBRN).

CALL FOR ACTION

For insurers to accelerate including terrorism non-damage business interruption cover (including CBRN) in their wordings and to promote this enhancement to brokers.

BIBA has more than 1,800 individually FCA regulated firms registered as members. 

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