subject: Insurance Issues - Terrorism - Part IV [print this page] Without such public declarations, the identity of the target may be an indication of whether the motive is specific or whether it has political motivationis the intention to influence the individual or the government? If, for example, animal rights campaigners chose as a target a public institution with no specific link with an individual so as to promote its aims for publicity purposes, it may well amount to an attempt to influence the government.
The government measures which have enabled all risk property insurers to reinstate terrorist cover were brought into force by the Reinsurance (Acts of Terrorism) Act 1993 which provides by section 2(2) that acts of terrorism are defined as:
"acts of persons acting on behalf of, or in connection with any organisation which carries out activities directed towards the overthrowing or influencing, by force or violence, of Her Majesty's Government in the United Kingdom or any other Government dejure or de facto."
The Scheme will only apply if the following factors are in place:
- the primary7 ARPI must be insurance of commercial property or certain domestic property in multiple occupation;
- the primary policies must include a terrorist exclusion clause; and
- a separate premium negotiated on a commercial basis has been paid by the assured to reinstate terrorist cover.
A new company, Pool Re, has been established by participating direct insurers and has been financed by premiums paid by those insurers. The reinsurance agreements are entered into between Pool Re and its members. Finally, a retrocession agreement has been entered into by the Secretary of State with Pool Re.
So far as the finances of the scheme of the Act are concerned, the direct insurer bears a deductible of 100,000 damage to a commercial property for each type of cover. There are five types of cover specified, namely, property damage, buildings, property damage contracts, business interruption, book debts and engineering/computers, thus resulting in a maximum exposure of 500,000 per property for the direct insurer. The direct insurer will bear the first 2,500,000 in the case of multiple occupation domestic property. Surplus liability is reinsured with Pool Re. The government is obliged to indemnify Pool Re if Pool Re is unable to indemnify the direct insurers from its own assets. Pool Re is obliged to pay premium to the government if its assets exceed 1 billion.
Insurance Issues - Terrorism - Part IV
By: Willis J. Watson
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