Counter-Terrorism and Border Security Bill

Written evidence submitted by Zurich Insurance (CTB07)

Zurich Insurance Submission: Counter-Terrorism and Border Security Bill Public Bill Committee Call for Evidence

About Zurich Insurance

Zurich provides a suite of general insurance and life insurance products to retail and corporate customers.

We supply personal, commercial and local authority insurance through a number of distribution channels, and offer a range of protection, pensions and investment policies available through financial intermediaries for the retail market and via employee benefit consultants for the corporate market.

Based at around 20 locations across the UK - with large sites in Birmingham, Cheltenham, Farnborough, Glasgow, London, Swindon and Whiteley - Zurich employs approximately 5,000 people in the UK.

Summary

The changing nature of terrorism and the events at Borough Market have highlighted the urgent need for reform in regard to terrorism cover for business interruption insurance. We, therefore, confine our submission to issues regarding Clause 19 and terrorism reinsurance, highlighting the following:

· As terrorism evolves, so too must the mechanisms which support victims and the expansion of Pool Re to enable its business interruption cover to include losses that are not contingent on physical damage to the commercial property is a welcome development.

· Indeed, Pool Re has made significant contributions to bring change around business interruption, but the potential scale of terrorism related claims impacting across portfolios remains high.

· We would question, therefore, whether it remains appropriate for a single insurer to bear the costs of a large scale terrorist incident and firmly believe that industry and Government must work together to address wider concerns regarding terrorism insurance.

· Principally, these are: removing inequality around individual victims’ compensation; building a new model to fund a uniformed compensation mechanism; and devising a holistic approach for compensating and rehabilitating victims of terrorism.

1. The changing nature of terrorism means that physical damage or destruction are no longer the primary objectives of terrorists with a marked shift from massive property damage to ‘lone wolf’ attacks and the use of vehicles as weapons. The attack at London Bridge demonstrated that whilst property wasn’t physically damaged, businesses still faced severe disruption and financial loss as large areas remained within police cordons.

2. We, therefore, strongly welcome Clause 19 of the Counter Terrorism and Border Security Bill which will amend the Reinsurance (Acts of Terrorism) Act 1993 so that Pool Re can extend its business interruption cover to include losses that are not contingent on physical damage to the commercial property.

3. However, the potential scale of terrorism related claims impacting across portfolios remains high and serious consideration must be given as to whether it remains appropriate for a single insurer to bear the costs of large scale terrorist incidents.

4. Indeed, a single terrorist incident could give rise to multiple types of claims exposing insurers across all portfolios which we firmly believe demonstrates the need for a holistic solution which should include consideration of the wider expansion of Pool Re.

5. We firmly believe that terrorism liabilities should not be the specific consideration of individual insurers and that the Government and industry must now work together to implement a long-term, holistic solution to ensure that the spread of terrorism risk across all lines of business impacted remains equitable and sustainable.

6. Moreover, any wider changes should also consider the inconsistencies within the current compensation regime as demonstrated in relation to the Westminster Bridge incident, where the compensation provided to those injured by the use of a car differed to compensation to those injured by the perpetrator once he had left his vehicle.

June 2018

 

Prepared 3rd July 2018