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The Government’s proposed bill to protect the public from terrorist attacks in public spaces has been much debated of late.
The Protect Duty bill, expected to pass later this year, aims to place greater liability on the owners of publicly accessible venues in the event of terrorist attacks, following the catastrophic events at the Manchester Arena and London’s Borough Market in 2017.
The legislation is expected to include significant changes to the insurance cover required by businesses and, while specific details are yet to be confirmed, it’s vital that the insurance industry has a clear understanding of how this is likely to affect our clients and how we must prepare for it.
Impact on businesses and how they’re covered
To understand the varying financial impact of the legislation on businesses, we must first look at who it’s likely to apply to and what changes will be required to their existing insurance cover.
Firstly, let’s look at the latter. Most traditional Public and Employers Liability policies don’t cover the risk exposures referenced in the Protect Duty bill, so they are likely to need additional specialist Terrorism Liability insurance. Some larger businesses may already have an element of cover against terrorism written into their existing policies, but the limits on these are normally very low, and the new legislation is likely to require wider protection.
As insurers extend the limits of liability for terrorist attacks, premiums for such products will be much higher, which will affect each business it applies to very differently, dependant on their size and ability to absorb these additional costs.
The way in which the government categorises who will and won’t be required to adhere to the regulations continues to be a contentious issue.
One of its propositions is that it should be applied to all owners of publicly accessible venues with a capacity of 100 people or more.
However, as pointed out by BIBA in its response to the initial consultation in July 2021, this would include virtually every public venue, including places of worship, community halls and restaurants, placing a significant financial burden on some organisations which are already facing significant financial pressures in the wake of the pandemic.
Instead, BIBA argues that the capacity threshold should start at 500 people or more, and be lowered in phases, to give smaller venues and businesses time to prepare.
Again, larger businesses may already have basic terrorism cover in place, as well as the resources to absorb the cost of increased cover and security staffing, which is also likely to be a requirement under the new legislation.
As a result of these increased costs, particularly across the events and entertainment industry, consumers are likely to see the price of tickets to events increase.
Getting prepared as an industry
To be able to support our clients effectively, full awareness of what the bill means and what cover is already available on the market is crucial.
Currently, the cover offered by government-backed Pool Re doesn’t provide the full breadth of protection required by Protect Duty proposals and is not necessarily geared to providing cover for much smaller businesses, but while this cover may be extended in future, there’s no reason why the London Market would not be able to cope with increased demands for Terrorism Liability insurance. There could still be a role to play for Pool Re in future in case of market failure, but as chief executive of Pool Re, Tom Clementi recently commented, it would be a case of “wait and see”.
Standalone terrorism products can offer highly flexible terms and limits, and a range of valuable extensions that help businesses get back up and running after a terrorist incident, but these solutions often aren’t the go-to for many brokers, who may be unaware of how these products differ from the support offered by the pool.
A positive sign is that it appears underwriters are very aware of the legislation coming in and what it means for businesses and the market. It’s been on our radar for some time giving us a chance to consider how to approach cover requirements when the bill passes, however, many brokers we have spoken to aren’t, and given that there’s still uncertainty around exactly when the legislation will pass or the exact scope of the requirements, it’s difficult for them to prepare for.
Insurers will also need to step up in response to the Duty, but again, without knowing the exact scope of the legislation, the market can only do so much to prepare.
Once details are known, they will have to assess levels of cover, not only in terms of the capacity at a venue, but the predicted business interruption losses that could arise from an attack.
It’s likely that underwriters will also need to review full events schedules for venues and consider issues such as advanced ticket sales when assessing premiums.
In conclusion, while most of the details of the Protect Duty bill are yet to be confirmed, it’s likely to have a significant impact on what cover and support UK businesses from us as an industry. For this reason, it’s vital we do as much as possible so that when it does come into force, we’re in the best position possible to work with our partners to assist them.
If you want to talk to us about Terrorism Insurance and how you and your clients can prepare for the Protect Duty, please contact Dan Moorcraft (email@example.com), or find out more about our Terrorism and Sabotage cover here.