We frequently see Leaseholders challenge Landlords about the arrangement of Terrorism insurance on the property they occupy. Leaseholders often do not feel that they should meet the costs of the insurance, that the lease does not expressly provide for it, or that the risk is very small or non-existent given the location of the property.
However; the threat from terrorist acts is very real across the UK and is constantly evolving. The law is also clear in that 'if the lease provides for risks considered by the CML, or a reasonable discretion to insure such risks as the Landlord sees fit, Landlords can satisfy themselves that Terrorism Insurance is indeed recoverable expenditure' (Qdime Ltd v Bath Building Management Co Ltd & Ors).
International terrorist groups such as Al-Qaeda, Boko Haram and Daesh have increasingly targeted civilians; focusing upon crowded places, places of worship, commercial and residential locations plus critical national infrastructure.
2016 has seen a dramatic increase in 'inspired' terrorist attacks versus 'directed' terrorist attacks (official Europol figures show
These threats are incredibly difficult to detect, prevent and prepare for. The tragic event in Nice provides an example of how the terrorist threat has changed, where the principal loss was not damage to property but contingent business interruption such as denial of access and wider loss of attraction, particularly affecting tourism and leisure. It is estimated that the lockdown of Brussels for 5 days cost an estimated €51.7m per day.
Pool Re remains the default Terrorism Insurance option for most commercial property and business interruption insurance programmes. It is a UK sovereign backed insurance that includes cover for damage caused by a terrorist act involving the deployment of chemical, biological, radiological and nuclear (CBRN) means. With the return of fighters from warzones in Syria and Iraq, where chemical weapons are available and there is evidence that research has been conducted into enhancing the capability to of Improved Explosive Devices to carry radiological payloads, this is an emerging risk for the UK.
It is essential that property owners make provision for the economic impact of a terrorist attack, transferring the costs of this wherever possible by way of insurance. The take-up of Terrorism Insurance is worryingly low outside London with current estimates by Pool Re suggesting less than 10% of all small to medium size enterprises are arranging Terrorism Insurance, placing the UK's resilience to Terrorist attacks at significant risk.
Source: Quarterly Threat Report – August 2016 by Pool Re