The cost of terrorism insurance for small businesses is set to fall sharply after Pool Re, the government backed insurer, cut its prices.
Businesses outside of London will feel most of the benefit. Prices in London, considered to be a higher risk than other parts of the country, will also fall but not so steeply.
Pool Re will more than halve the price it charges insurers for some types of small business cover, but it will then be the responsibility of the insurer to pass that on to their customers.
Very few small businesses buy terrorism insurance, which is usually sold as an add-on to property policies. The attacks in Manchester and London over the summer left a swath of companies nursing losses that were not covered by any of their insurance policies.
“We’ve changed the way we look at SME pricing and we’ve been able to make a significant reduction in the premium,” said Julian Enoizi, chief executive of Pool Re. “We’re trying to make the price so much lower that it becomes a no-brainer.”
He said that the new prices will better reflect the risks that small companies face.
Pool Re does not sell insurance directly to businesses. Instead it provides back-up cover to other insurers, enabling them to sell terror insurance to their customers.
The new prices are part of a package of measures designed to increase take-up among small business. They were outlined in a letter to insurers this week from Mr Enoizi.
One of the biggest problems with terrorism cover has still to be resolved though. At the moment, Pool Re can only pay out to businesses that have suffered physical damage because of a terror attack.
Companies are being asked to pay up to a scheme that won’t cover the kind of attack that happened at London Bridge, because business interruption cover is limited to physical damage
But over the summer, many businesses suffered losses because of the attacks despite not having any physical damage. Traders in Borough Market, for example, found themselves behind the police cordon and lost 11 days of trading. But because most of them were not physically affected, even those that had terror insurance could not claim on it.
Neil Coyle, MP for Southwark & Old Bermondsey, has been campaigning on behalf of the businesses hit by the Borough Market terror attack.
He said that 4 months afterwards, many traders had still not received compensation.
“Companies are being asked to pay up to a scheme that won’t cover the kind of attack that happened at London Bridge, because business interruption cover is limited to physical damage,” he said.
“There are businesses that had insurance that will not receive money. The government needs to get on and update the legislation to extend the cover of Pool Re to cover knife and vehicle attacks.”
Mr Enoizi recognises that there is a problem, and says that he is in talks with the government on changing the rules governing Pool Re so that this non-damage business interruption can be covered.
Pool Re recently won government backing for cyber attacks to be included in its coverage.
Mr Enoizi said he had also made it easier for terrorism insurance to be sold alongside property cover, and had provided advice to businesses on how to cut the risks they face. Companies that follow the advice could have a discount on their insurance.
“We need to make small businesses aware of the risk, aware that they don’t have terror insurance and make sure the price is reasonable,” he said.