By Daniel Sacks, Analyst, Insurance Consulting at LCP
As currently drafted, the Bill will apply to all publicly accessible premises with a capacity of 200 or more. Those with a capacity of 800 or more will be subject to an enhanced tier of responsibility with more strenuous requirements. All venues must carry out basic training on terrorism awareness and complete a terrorism evaluation, considering how best to respond to a threat and suitable evacuation, invacuation, lockdown and communication procedures.
Enhanced tier venues will be required to appoint a designated officer responsible for complying with the Bill. The officer’s duties would include completing terrorism risk assessments regularly and considering implementing reasonable measures to mitigate the risk and severity of a terrorist incident.
Matt Jukes, Assistant Commissioner of the Metropolitan Police and Head of Counter Terrorism Policing in the UK, gave evidence to suggest that, of the 37 late-stage plots disrupted in the UK since 2017, 10 would have taken place at venues covered by the Bill(1).
How may it affect insurance markets?
The new Bill could impact insurance markets in several different ways. Two key issues are how it will impact D&O/liability policies and how SMEs will be affected. The Bill requires venues to take certain steps to protect people and help prevent terrorist attacks. It is conceivable that this could expose venues to claims if they are found not to have met the requirements. In turn, this may create additional needs for insurance coverage.
Whilst the Bill clearly states that there is no right of action in civil proceedings, DAC Beachcroft believes that the Bill will lead to an increased demand for liability insurance(2). Lockton also believes a particular focus is needed on general liability and employers’ liability limits, with liability potentially arising under the Corporate Manslaughter Act(3). For enhanced tier venues, both DAC Beechcroft and Lockton believe there will likely be an increase in claims under D&O policies as the Bill specifies the responsibilities of designated individuals and potentially opens the door to senior management liability.
Venues will need to consider whether their existing policies include terrorism cover and, if so, whether limits are sufficient. For this reason, there is likely to be an increase in demand for terrorism-specific policies at larger venues to ensure they have adequate coverage.
According to Pool Re, “Only 4% of SMEs [small and medium-sized enterprises] in the UK currently have terrorism insurance cover, and many more than that will likely think they have cover.”(4). The exclusion of terrorism as a standard feature of commercial property package wordings potentially leaves SMEs without cover or thinking they have cover when they don’t. In its recent market consultation, Pool Re is seeking to “reduce these significant protection and expectation gaps”(4) and promote greater economic resilience to terrorist attacks.
Insurers should also consider what additional services they can provide to SMEs to enhance the overall terrorism insurance package. For instance, insurers such as Allianz and Markel offer access to extras such as 24/7 legal advice or standard documentation for their SME customers. Insurers could go further by offering eg access to qualified physical security engineers who can assist with the design and implementation of improved protective measures or standard documents to help venues show the security regulator that they are meeting the requirements.
What next?
The Bill has gone through several drafts before and after the 2024 General Election. One interesting omission from the latest draft presented to the House of Commons is the requirement for premises to revise their risk assessments upon a material change in the premises’ use or on an annual basis. Given the ever-evolving threat landscape, it seems odd that risk assessments are now not explicitly required to be revised at mandated points.
Pool Re and the Association of British Insurers, in their joint written evidence to the Home Affairs Select Committee(5), go a step further, suggesting that revisions to risk assessments should also be explicitly mandated when the Joint Terrorism Analysis Centre (JTAC) adjusts the National Terror Threat Level. Sir John Saunders made this recommendation in the Manchester Arena Inquiry(6), where it was determined that the venue’s risk assessment did not correctly account for the National Terror Threat Level.
Key takeaways:
• The new Terrorism (Protection of Premises) Bill will have wide-ranging effects on venues and event organisers across the UK, with significant changes to the statutory responsibilities and requirements for larger venues.
• The Bill will hopefully encourage an increase in terrorism-specific insurance and reinstatement of terrorism cover in other policies, helping to close the gap in coverage.
• Policies most likely to be affected are (various) liability and D&O. It is also possible that the responsibilities placed on SMEs by the Bill will lead to demand for terrorism exclusions to be removed from insurance cover.
References:
1. https://assets.poolre.co.uk/sitefiles/2023/08/Pool-Re-2023-Martyns-Law-Webinar-slides.pdf
2. https://www.dacbeachcroft.com/en/What-we-think/The-terrorism-protection-of-premises-bill-has-been-introduced-into-parliament
3. Preparing for the new UK terrorism liability legislation | Lockton
4. Press Release: Pool Re launches market consultation in attempt to enhance terrorism coverage for SMEs - Pool Reinsurance
5. https://committees.parliament.uk/writtenevidence/122042/pdf/
6. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/994856/CCS0321126370-002_MAI_Report_Volume_ONE_WebAccessible.pdf
|
