Buildings Insurance and Terrorism Cover: Should You Include It?

 

When it comes to renewing your buildings insurance there are many additional options available for you to consider. One of these is to cover against the risk of terrorist attack. Whilst on the one hand you do not want to feel as though you are being alarmist, you may still find it worth that little extra for the piece of mind. After all, any risk is still a risk.

 

Why should we consider this add-on?

The Reinsurance (Acts of Terrorism) Act 1993 defines terrorism 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 United Kingdom or any other government de jure or de facto.”

To read this, you might be forgiven for thinking that this is something that would never happen to your home and so you feel you cannot justify the extra cost of the additional cover. But let’s take a moment to consider the following:

  • Check your lease. The lease of your property may make it a requirement to hold out cover against terrorism. Whilst leases dating from the pre-1990s may not specifically state requiring as much, bif there is generally a requirement for full or comprehensive property insurance, this might mean that they expect the property to be covered against terrorism. By definition, the obligatory comprehensive cover could mean protection from the risks of explosion caused by terrorists, something tested in law in what is known as the Q-Dime case. Likewise, lenders may insist on this cover when it comes to individual leaseholders’ mortgages also. 
  • Consider the neighbours. While the building itself might not necessarily be a target, there is the risk of individual residents being threatened and put at risk. Bomb factories in blocks of flats, for example, are not unheard of.

 

If we really need it, why isn’t it compulsory?

Following a long history of terrorism in England and Wales, according to new data the UK recorded the biggest economic loss from terrorism of all the countries in the EU between the years of 2004 and 2016. These attacks have cost the country an estimated £38.3bn in GDP growth during that period.

While a general household policy might automatically include this cover, properties such as blocks of flats, for example, are treated as a commercial insurance risk. This means that terrorism cover is not included automatically and so must be added as additional cover.

 

Pool Re? What does that mean?

Following the relentless IRA campaign during the 1970s, and 1992’s bombing of the Baltic Exchange by the IRA, resulted in huge losses for the insurance market. In order to ensure that it could meet its obligations, the Poor Reinsurance Company limited – or ‘Pool Re’, was set up by the Lloyd’s Syndicates and fellow insurers. This allows members of the scheme to share the risks and provides support to help cover losses resulting from acts of terrorism, no matter how large they may be. 

The formation of Pool Re means that buildings that might not otherwise get insurance against losses caused by terrorist attack can now do so.

Deacon Insurance offers a wide range of competitive policies. They can discuss your individual needs and concerns and recommend the cover that is most suitable for you and your circumstances. 

You might have read that, due to the structure of reinsurer payments, insurers often pay smaller claims themselves. This might lead you to believe that any claim you make is unlikely to reach the threshold at which Pool Re pays out. Do not let this deter you, you could still need specialist cover in place to ensure that you are covered against damage resulting from explosions caused by terrorism, something that otherwise may not be covered at all.  

 

This article provides guidance on the issues covered and should not be relied upon. Readers are required to do their own research and to speak with a specialist advisor for further information. 

 

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