Insurance Issues - Terrorism - Part II
A dramatic change in the market took place following the massive explosion that had
occurred in St Mary Axe in 1992 resulting in damage to the Commercial Union building and other buildings in the City. At the end of 1992 the reinsurance market withdrew cover for terrorism leaving many direct insurers exposed and being required to cancel existing cover, leaving assureds with commercial properties, particularly in the City area, exposed to a substantial risk. This led to the unusual situation of the government agreeing to act as a reinsurer of last resort.The reinsurers' main concern had been that terrorism was a political issue and, as such, a risk which would not respond to normal risk management and loss control measures. As a result of the withdrawal of reinsurers from the market, on 12 November 1992, the ABI issued a press release announcing that it had made available to its members a model terrorism exclusion for industrial and commercial risks as follows:
'The insurance does not cover damage or loss resulting from damage in Great Britain by fire or explosion occasioned by or happening through or in consequence directly or indirectly of terrorism except to the extent suited in the special provision."
It is also interesting to note that the special provision relates to the standard Northern Ireland exclusion and that the Great Britain exclusion includes a reverse burden of proof clause.
Before considering the measures adopted by the government, it is useful to consider the various definitions of terrorism volunteered by the mainstream English dictionaries. The Collins English Dictionary describes terrorism is "a systematic use of violence and intimidation to achieve some goal".
Insurance Issues - Terrorism - Part II
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