The tactics of terrorism are evolving. ‘Lone wolf’ attacks, such as the gun attack on the Tunisian beach, or the current attacks in Paris that spread across multiple locations and included a variety of crowded places, are difficult to predict, prevent or prepare for.
Bolstering the UK’s defences against an evolving terrorist threat from a humanitarian and social perspective is therefore painfully clear. But there is another aspect that is crucial to preparedness: that of economic mitigation. This is not just important for society and governments alike, but for small businesses and community venues, including family-run restaurants, bars, venues, and cafes (which were the main targets in Paris).
Terrorist tactics that target crowded venues, and the devastating impact that they are reaping, have huge ramifications for terrorism insurers, governments and councils nationally and internationally. Being able to provide prompt payment to businesses, which can run into the tens to hundreds of millions, in the event of a terrorist incident is fundamental to ensuring that society can move forward. This is where reinsurance companies, who effectively guarantee the insurance companies and governments, are critical.
Back in 1993, when the mainland IRA terrorist campaign was at its height with attacks in Manchester and London, the Government established Pool Re to provide terrorism insurance coverage for commercial property and business interruption.
Now, we provide a guarantee for insurance companies and governments against terrorist incidents. Here in the UK we have a buffer of £7.3 billion to pay claims arising from terrorist acts, comprising capital and reserves exceeding £5.5 billion, and commercial retrocession worth £1.8 billion. Losses above that threshold activate an unlimited government guarantee. It is this guarantee that is so important to ensuring that the lights stay on in the face of such terrible adversity.
Globally there are 15 major schemes, including GAREAT, the French terrorism insurance pool, with similar terrorism re-insurance models. As it stands, these reinsurance pools have legal obligations to facilitate the provision of terrorism re-insurance in their respective countries. Just two weeks ago, Pool Re hosted the first ever National Terrorism Reinsurance Pools Congress, drawing reinsurance representative from 13 of the 15 major countries, to discuss our implied, and I believe even moral, obligation to promote and improve the resilience of our Cities crowded places or key sites of employment and commerce.
In this regard, particularly given the evolving threat of attacks on small businesses, Pool Re has set about increasing the take-up of terrorism insurance by small businesses owners. To do so, we have introduced premium discounts of up to 40%.
To promote resilience, we have entered into a partnership with the Government’s National Counter Terrorism Security Office (NaCTSO). This partnership, established to incentivise the Property Security Improvement Activity (PSIA) designed by NaCTSO, should improve the resilience of crowded places and key sites of employment and commerce. PSIA promotes simple, nationally consistent, and proportionate risk management activities designed by counter-terrorism professionals both to minimise the potential for attacks, and to promote security measures. Pool Re offers lower premiums to organisations engaged with PSIA, which in future could be expanded to include a broader range of businesses.
Whilst Pool Re will promote resilience and coordination within the UK, we are also ready to participate in wider global planning for the management of terrorist threats and are reviewing this with national security bodies, including the Office for Security and Counter Terrorism (OSCT). As the risk evolves, economic stability and mitigation, and guaranteeing small businesses can rebuild quickly is becoming ever more important.