Property firms exposed to terror
THOUSANDS of property companies will have no cover for non-bomb or fire-related terrorist damage from today because leading insurers, including Lloyd's, Axa and Royal & SunAlliance, are unable to spread such risk in the commercial market.
Government reinsurer Pool Re, responsible for mopping up terrorist related risk untouched by the market, cannot step in under present legislation.
Many companies are already without cover, but the number is set to soar today, one of four traditional annual renewal dates for the industry. Although the Government is looking at the problem, it remains to be convinced the commercial market has broken down to the extent that it needs to act.
Richard Lambert, a director of the British Property Federation, said: 'If nothing is done, and I accept that the Government is doing something - although more slowly than we would like - ultimately every commercial property company in the country will be holding uninsured risk.'
The insurance world has re-evaluated the terrorist risk after the attacks on the US on 11 September. Terrorist cover used to relate to damage caused by fire or explosion. But now the insurance companies must consider endless doomsday scenarios.
Colin Short, chief underwriter at Royal & SunAlliance, describes an aircraft crashing into the Thames Barrier and flooding large parts of London as an example of non-bomb or fire action. The reinsurance industry has collectively decided such risk is too great, prompting insurers to withdraw cover.
Insurers known to have written total terrorism exclusions into their contracts include Allianz, Cornhill, Axa, Group Armour, Lloyd's, Royal & SunAlliance, Winterthur and Zurich.
BPF president Jeremy Newsum said anecdotal evidence suggests the lack of full cover is already hitting property deals with transactions and lettings being abandoned due to the risks. 'There is a problem if the market fails to deliver the level of insurance the property industry needs because that underpins its smooth working,' he said.
Newsum, chief executive of Grosvenor Estates, added that the Government had not yet been persuaded of the case for broadening Pool Re's remit. However, property in Britain is better protected than buildings in many other countries, including the US and Australia. Terrorist cover there is now almost impossible to obtain.
