You probably hear a lot about terrorism insurance, and may be confused over whether or not it is optional. Afterall, you live in a flat, why would you need terrorism cover? But at the end of the day the answer is almost always, yes, you should be considering it.
Take a look at the definition of terrorism and it may sound as if this is something that can never apply to your flat. It can be tempting for a freeholder or the director of a management company, when considering renewal of their buildings insurance, to decline terrorism cover.
It may seem to be one of those extra costs that you could do without. After all, how could your block be at serious risk of being a target for terrorist attack? It’s not that simple, though.
Here are a few things to think about:
- The lease may make it a requirement. Older, pre-1990s leases may not mention terrorism specifically, but if there is a requirement for full or comprehensive property insurance you might need this cover. The obligation to have comprehensive cover could, by definition, mean protection from the risks of explosion caused by terrorists. This is a matter that has been tested in law in what is known as the Q-Dime case (Qdime Ltd -v- Bath Building (Swindon) Management Company Ltd Various lessees of the Bath Building  UKUT 0261 (LC))
- Individual leaseholders’ mortgages, as lenders may insist on it.
- The building may not be a target, but individual residents could be threatened and at risk; even worse they could be terrorists themselves. Making bombs at home is not unknown.
So if we have to have it, why is this cover not included as standard?
England and Wales have a long history of terrorism. In June 2018 the Independent reported that the UK recorded the biggest economic loss from terrorism among all the countries in the EU between 2004 and 2016, according to new data, with attacks costing the country an estimated £38.3bn in GDP growth during that period.
Losses can be massive and special arrangements have been made for commercial property to ensure that high value claims can be met. This is relevant to blocks of flats because, while a general household policy normally includes this cover automatically, a block of flats is treated as a commercial insurance risk meaning terrorism cover is excluded and must be added as additional cover.
Older people among us will remember what seemed to be the relentless IRA campaign in the 1970s. Indeed, it was the IRA bombing of the Baltic Exchange in 1992 that precipitated changes in the insurance market, which was facing absolutely massive losses and needed to ensure that it could meet its obligations.
What is Pool Re?
The answer that insurers and the Lloyd’s Syndicates found was to set up the Pool Reinsurance Company Limited, also known as Pool Re, to share the risks. Membership of the scheme gives them the support to help cover losses resulting from acts of terrorism, regardless of the scale of the claims. Without such a set-up, many buildings would be unable to get insurance against losses caused by terrorist attack. Ultimately, if they were unable to meet their obligations due to large losses which exhausted their reserves, they would draw funds from UK Government.
At Deacon we offer a choice of competitive policies; one of which offers broader cover to include attacks on individuals in the block if, say, you have prominent figures living in the block for example.
We will discuss your individual needs and find suitable cover for you. There is no extra administration for you as the insurers require only the Statement of Facts for the Blocks of Flats policy, which we already hold for existing customers.
Even though you may have read that insurers often pay smaller claims themselves due to the way payments to the reinsurer are structured, and think any claim you make is unlikely to reach the
threshold at which Pool Re pays out, you could still need specialist cover in place. Otherwise, damage resulting from explosions caused by terrorism may not be covered at all.
History of terrorism
The term terrorist is believed to have originated during the Reign of Terror (1793 – 1794) in France. It was a period of eleven months during the French Revolution when the ruling Jacobins employed violence, including mass executions by guillotine, in order to intimidate the regime’s enemies and compel obedience to the state. Some people argue that as it was action by the state, not against it, this was not terrorism – albeit undoubtedly utterly terrifying for anyone living in France at the time.
Other people cite the Gunpowder Plot of 1605 as the first attempt at a terrorist attack. The conspirators intended to kill King James I and the members of both houses of Parliament, and then restore the Catholic faith to England.
Or maybe the roots of terrorism date back to the 1st century and the Sicarii Zealots, Jews who opposed the Roman occupation of Judea; the 11th century and the Al-Hashshashin, the Islamic sect from whose name the word assassin comes; or the 19th century and the Irish Fenian Brotherhood and Russian Narodnaya Volya?
Certainly, the 19th Century conspirators would have benefitted from the development of powerful, stable, and affordable explosives, including dynamite in 1837, and levels of globalisation that helped radical ideas to spread quickly and grow in influence.
Who protects us?
The Police and Secret Services are among our first lines of defence against terrorism.
Counter Terrorism Policing is an alliance of UK police forces working closely with security and intelligence agencies to prevent, deter and investigate terrorist activity. It is accountable to the National Police Chiefs’ Council (NPCC) Counter Terrorism Coordination Committee (CTTC) and works tirelessly to protect the public and our national security.
The first police unit to combat terrorism was established in 1883 by the Metropolitan Police, initially as a small section of the Criminal Investigation Department. It was originally known as the Special Irish Branch, unit’s name was changed to Special Branch as its remit steadily widened over the years. In the early years of the 21st century, it merged with Scotland Yard , where heading up the counter terrorism branch is considered to be the toughest job in British policing.
At the end of the Second World War there were a total of 17 MI (Military Intelligence) sections in the War Office. Today, just three organisations make up the British secret services.
MI5 is responsible for countering covertly organised threats to the UK, and its principle activity is the fight against terrorism, both international and home grown. It began life as the Secret Service Bureau in 1909 to counter Imperial Germany’s espionage operations in the build up to the First World War. Between the two world wars the service was increasingly concerned with espionage threats from the far right (fascism) and the far left (communism). During World War II, MI5 had success uncovering enemy agents and feeding misinformation to the enemy, notably helping the allied landing in Normandy in 1944. Since the fall of the Iron Curtain, MI5 has been predominantly concerned with Northern Ireland and international terrorism.
MI6, officially known as the Secret Intelligence Service, operates world-wide to collect secret foreign intelligence in support of the British Government’s policies and objectives. It commonly deals with challenges such as regional instability, terrorism, the proliferation of weapons of mass destruction and illegal narcotics. The head of MI6 is known ‘C’ after its first chief, Sir Mansfield Cummings. Due to the sensitive nature its work, MI6 has traditionally been shrouded in secrecy, and little was known about the service, other than the fictional exploits of 007. It is widely accepted that a man like James Bond would not be hired by MI6 these days.
GCHQ, the Government Communications Headquarters’, eavesdrops on communications throughout the world, and it is possibly the most secretive of all the intelligence agencies. Its headquarters are in Cheltenham, Gloucestershire; although it was famously based at Bletchley Park during the Second World War.
Cracking the Enigma code in 1940 possibly prevented the collapse of British resistance due to starvation, as German U-Boats were decimating Atlantic convoys. Another major wartime achievement was the design, installation and operation of the world’s first electronic computer, COLOSSUS.
The sole purpose of this article is to provide guidance on the issues covered. This article is not intended to give legal advice, and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. We make no claims as to the completeness or accuracy of the information contained herein or in the links which were live at the date of publication. You should not act upon (or should refrain from acting upon) information in this publication without first seeking specific legal and/or specialist advice. Arthur J. Gallagher Insurance Brokers Limited trading as Deacon accepts no liability for any inaccuracy, omission or mistake in this publication, nor will we be responsible for any loss which may be suffered as a result of any person relying on the information contained herein.