Nature of terrorism may need redefining
The recent wave in terrorist attacks in Europe, which included events in Nice, Brussels and Paris, may prompt the insurance industry to innovate and create new products, and governments to redefine the term terrorism.
That is the view of Julian Enoizi, CEO of Pool Re, the UK government-backed terrorism pool.
Enoizi said Pool Re is encouraging its members to develop new products that extend coverage to business interruption, for example. But the challenge might be how to sell these products and drive demand, he admitted.
In the case of the Brussels attack, for example, the biggest financial loss to companies was caused by business interruption, which is not generally covered by terrorism insurance, Enoizi explained. It is, however, unclear whether the government should play a role in expanding the coverage or if the private market should take up this mantle, he noted.
The definition of terrorism may also need to be updated due to the nature of terrorism attacks, he said.
It is unclear, for example, whether the 2014 hostage crisis at the Lindt Chocolate café in Sydney, Australia, should be categorised as terrorism, Enoizi said.
Similarly, there is a form of ISIS-inspired terrorism where individuals are encouraged to use whatever means they have to create havoc. “Is that really terrorism or is that religion-inspired extremism?”
Enoizi admits that the terrorism definition as described in the law and used by Pool Re is quite old and doesn’t take into account, for example, cyber crime.
The last claim Pool Re paid out was in 2013 and the question of whether that was terrorism or anarchy was raised at the time.
The Home Office ultimately decided it fell under the definition of terrorism, but that debate is bound to happen more and more in the future, he noted. A redefinition of terrorism may need international cooperation.
“It is inconceivable that there could be a loss in Germany and a similar loss in the UK and one country then says it was terrorism but the other says it wasn’t,” he said.
Pool Re was established in 1993 as a response to reinsurers withdrawing coverage during the Provisional IRA’s bombing campaign. Pool Re was founded by the insurance industry in cooperation with, and backed by funding from, Her Majesty’s Treasury, to form a private sector solution to a public policy objective.
To date, Pool Re has paid out claims of more than £600 million ($796 million) at no cost to the UK taxpayer. The largest claim resulted from the 1993 Bishopsgate bombing in the City of London—£262 million.
