Reposted from Bloomberg

Insurance against terror attacks must adapt to face up to the threats posed by so-called lone-wolf militants and the rise of cyber crime.

That’s the view of Julian Enoizi of Pool Reinsurance Co., the U.K. government-linked body that backstops insurers against terror-related payouts. The spate of recent attacks in the nation’s capital and the suicide bombing of a Manchester pop concert in May highlighted shortcomings in coverage that need to be addressed, he said.

“We need to close gaps such as business interruption that’s not the result of physical damage and coverage of cyber terror as well the low take-up among businesses outside of London,” the Pool Re chief executive officer said in a phone interview.

Vehicle attacks on Westminster Bridge in March and London Bridge three months later highlighted how the industry “should address the issue that motor insurance provides unlimited cover,” potentially leaving insurers liable for massive payouts, he said.

Pool Re was formed as a venture between the industry and government in 1993 after the violence of the Provisional Irish Republican Army prompted insurers to withdraw cover for terror-related damage. The company has met more than 600 million pounds ($780 million) of claims, the largest being its 262 million-pound payout for the IRA bombing of Bishopsgate in the City of London financial district that same year.

Lost Earnings

Two-and-a-half decades later, the attacks of 2017 have shown the need for Pool Re to start covering so-called non-damage business interruption, so that firms could claim for lost earnings even if property was left intact, Enoizi said. Broadening cover would mean higher reinsurance premiums for Pool Re’s members, which include the local units of every major non-life insurer from Allianz SE and Aviva Plc to Zurich Insurance Group AG.

He expects the largest claims this year to result from damage to the Manchester concert hall and interrupted business due to the closing of the nearby train station. In the capital, a man drove a car into crowds on Westminster Bridge in March before attempting to storm parliament, while in June, attackers in a van rammed pedestrians on London Bridge, before going on a stabbing rampage in a nearby entertainment hub.

“The Westminster, Manchester and London Bridge attacks all resulted in claims for Pool Re,” Enoizi said. “It’s still too early to tell how large these will be. We are still receiving claims.”

How Insurance Is Morphing With the Terror Threat: QuickTake Q&A

Pool Re’s support means it would take a catastrophic terror attack with damages exceeding 10 billion pounds before the capacity of the U.K. insurance industry was exhausted, according to Enoizi. Still, that’s less than a third of the $43.6 billion insured loss from the Sept. 11, 2001 attacks -- the costliest terror-insurance claim in history.

“After 24 years and 16 separate terror events” Pool Re works well, “but we need to evolve the model in line with changing threats,” he said.

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