The prospect of biological or chemical attacks upon a civilian population has been known about for decades. In World War II, people were issued with gas masks for such an eventuality, though no attack ...

The prospect of biological or chemical attacks upon a civilian population has been known about for decades. In World War II, people were issued with gas masks for such an eventuality, though no attacks came.

War is upon us again and biological terrorism is real, in the form of anthrax, which has to date claimed three lives. Another two are seriously ill and it is believed at least 40 have been exposed to the bacteria.

So far, there have been no occurrences in the UK, but a mood of uncertainty and fear prevails. What is the reaction of British insurers?

Only one insurance company has issued a policy specifically against an anthrax attack. Maverick Bristol-based insurer Ultra-violet recently produced a policy called Anthrax-safe, giving cover of £1m against "accidental death or permanent total disability" from anthrax. The premium is £100 a year and can only be taken out on an individual, rather than corporate, basis.

Managing director Simon Burgess says: "No other insurers have done this. Some of them think we're ambulance-chasing." But, he claims, some companies have excluded anthrax from policies, so must be aware of a risk. "They can't have it both ways," he says.

Burgess says he has already run out of capacity, as he has had hundreds of takers and has also been approached by a UK-based postal company which wants to place £1m of business.

"We're just responding to requests from clients. We did a similar thing at the height of the Gulf War. If there's a deliberate infection of persons, then we'll respond accordingly."

At the Association of British Insurers (ABI), the situation is less clear-cut. A spokesman says: "It's a new situation and a new risk. Insurers are trying to think it through, to see what the risks are and what might be covered."

Defining the problem
A thorny problem for insurers is the definition of terrorism. In many cases, such instances and other "acts of war" are automatically excluded. At this stage, the ABI is "in exploration and consultation" alongside the government on the subject.

According to a spokesperson from a top six insurer, a business interruption claim triggered by denial of access or contamination of premises through a biological terrorism attack would only be covered as a result of "fire or explosion occasioned by or in consequence of terrorism". He confirms the company would not consider any extensions or alterations to the standard terrorism provision at present.

No one has established for certain if the anthrax attacks are the work of organised terrorists or a demented individual acting alone. However, the anthrax used in the attack on the US Senate was found to be of "weapons-grade" quality, suggesting it might have been manufactured with the help of a rogue state.

There have been a handful of anthrax scares in the UK, though none have proved to be genuine. Nonetheless, the government has issued guidelines to local authorities and health professionals, including dealing with other potential biological weapons such as smallpox, botulism and plague.

Victims of the US anthrax attacks may have been covered under existing personal life and health policies. But more hard thinking needs to be done.

The Association of Insurance and Risk Managers (Airmic) is very concerned. Director general David Gamble says: "Is it an injury or not? It is something we are seeking legal advice on for our members.

"Members are concerned about disruption caused by the slowdown of mail in the US. There are lots of printers and mailing houses that will be seriously affected by the mail problems.

"I can only compare it to the Sarin gas attack in Japan. I lived 100 metres away from the tube station that was attacked. There was enormous business disruption. It was never clear who paid the costs though."

NFU Mutual, Britain's largest agricultural insurer, has been providing anthrax cover for decades under its business control policy. But, up until now, this has mainly been for loss of livestock through animal anthrax and the rare cases of human anthrax from infected animals, which are normally readily treated. There have been only 14 cases of human anthrax in the past 20 years and all survived. The last fatality was in 1974.

With NFU cover, a farmer can insure his or her workforce against such eventualities under personal accident and illness cover or an individual worker can take out their own insurance. But, according to NFU spokeswoman Sylvia Newton, there could even be cover for terrorist attacks.

A hotel, for example, could make a claim under a business interruption policy if the presence of a notifiable disease was confirmed and thus the business closed down.

"Irrespective of whether the disease was the result of terrorism, a business could claim for loss of income," she says. However, this would not apply if there was merely an anthrax scare, even if, in the case of say a hotel or restaurant, people were put off going there.

But even if anthrax is found to be present in the UK, the risks are not uniform. Skin anthrax, which develops into black ulcers, can be treated with antibiotics and intestinal anthrax from swallowing the spore causes severe stomach ache and can also be treated successfully. The most feared is the pulmonary version, when it is breathed into the lungs, which caused the US fatalities.

Catastrophe backstop
Medical insurer Bupa says it has had its radar on, given the public concern. Chief actuary Geoff Brown says with milder forms of anthrax, "there would be no cost implications. It would be dealt with under private medical insurance. We'd handle it as we would any infectious disease or infection."

However, he adds: "While our aim is to pay claims on innocent victims, if there were thousands on thousands of claims we might want a `catastrophe backstop'."

This would effectively mean limiting or curtailing cover through critical illness, income protection or life insurance.

Brown also believes that, far from shying away from terrorism cover, "many have moved away from terrorism exclusion clauses".

As things stand, the insurance industry is not going into "emergency mode" over the threat of anthrax or other biological weaponry. So far, there are no plans to hike up premiums and insurers do not see a great cost issue ahead. Certainly, the UK government is going to great lengths to assure us that the threat of widespread biological attack is minimal.

But insurers will still have to ponder events on the other side of the Atlantic and find that balance between a measured response and being ready for that unthinkable moment n