As another terror campaign hits the Indian city of Mumbai (formerly known as Bombay) we find ourselves asking ourselves the question, are we insured for terrorism? According to the article “Terrorism: the more attacks, the less insurers covering you for it” ‘terrorism insurance’ is difficult to find.
Norwich Union, immediately the 07/07 bombings hit London with a terror campaign, were observed amending the home insurance policy content. Their new wording stated clearly and concisely that terrorism acts were not to be covered. No fewer than sixteen large insurance companies followed suit stating clearly that terrorism could not be insured against.
Despite the likelihood of a terrorist attack being very small, when they do happen, all the usual risk models go out the window. In terms of monetary and financial value, insurance is engineered to protect against the threat of the probable to the very improbable. Terrorist attacks are considered extraordinary events and so it is difficult for any insurance company to realistically account for it. One terrorist attack is capable of being highly catastrophic within a concentrated and minimal period of time and so is difficult to measure.
The cost of the damage of the IRA attack on the Manchester Shopping Centre in 1996 exceeded £200 million while the Canary Wharf bomb attack caused over a hundred million.
The government are looking at ways to encourage our insurance companies with some sort of encouragement to provide terrorist cover. Once such incentive is to get insurance companies to pool their resources. According to an article in the Telegraph following 9/11, negotiations have taken place instigated by the government between insurers and something called Pool Re. Pool Re is a scheme whereby insurance companies and the Government join forces to provide a guarantee that any losses brought about by acts of terrorism to enterprises will be covered.
In the meantime, it is very difficult to come by terrorism insurance although the situation does seem to be in a state of elementary metamorphosis. Although terrorism cover is practically impossible to come by, you may be able to achieve it through your travel insurance policy (check your small print for confirmation!)