Terrorism insurance – moves to change basis of insurance and reinsurance coverage?

Two recent developments regarding the scope of (re)insurance protection against the consequences of terrorist incidents are noteworthy.

First, in respect of motor insurance only, an MIB consultation on scope closed on 22 March 2018 and the outcome is awaited. The consultation paper, aimed at MIB members only – ie motor insurers – sought views on whether the cost of compensating for a terrorist incident arising from the use of a vehicle should remain (by operation of the MIB’s articles of association) with the insurer of the vehicle concerned or whether it should be transferred, by amending the articles, to central MIB funding and thereby spread across the whole market via the MIB levy? An enhanced threshold of the support of 75% of the market would be required for these purposes. [It should be noted that the MIB Uninsured Drivers Agreement was, on 1 March 2017, amended to require coverage of terrorism incidents.]

The second matter concerns terrorism reinsurance and the scope of the Pool Re scheme. A Written Ministerial Statement from the Treasury, also on 22 March, confirms the government intends to legislate to extend the protection afforded by Pool Re to business interruption losses sustained by (re)insureds in the absence of property damage. This gap in existing arrangements may have been highlighted by the example of traders and business in Borough Market whose undamaged premises were closed for several days by the authorities in the aftermath of the London Bridge terrorist incident last June. The text of the statement, in which the intention to legislate is subject to finding the necessary Parliamentary time – which might be difficult in the year that remains of the current busy session – can be viewed here.

ak Alistair Kinley, director of policy and government affairs

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