Pool Re warns SMEs against bypassing the broker for terror cover

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It hopes to raise awareness with a monthly report on terror as well as continuously educating brokers

The broker is crucial to SMEs buying the right level of terrorism cover, but most businesses favour digital methods of buying it, Steve Coates, chief underwriting officer at terrorism reinsurer, Pool Re told Insurance Times.

But this model is changing partly due to the Covid-19 pandemic, he added.

“Generally, SMEs buy the cover that they either have to buy or cover they are forced to buy in law or that their bank tells them to buy.

”But they have finite insurance budgets, so when their broker tells them they have to pay another £50 for terrorism a lot of them do not buy it, Coates said.

“Worryingly, quite a few SMEs don’t even have this conversation as its all highly commoditised or transacted online through a broker channel. So, there is no face-to-face discussion around needs. It’s the client buying what they [think they] need and that’s the end of it.”

Due to Covid-19 being an unprecedented and super extreme event, it is similar to an extremist attack as it is unpredictable.

“Unlike the pandemic, terrorism cover is available and affordable, I think there are a lot more conversations going on now,” Coates added.

Former subjects of interest

The reinsurer also announced that it will be putting out a monthly report from this month, with the aim of improving the awareness of the contemporary and future threat landscape.

This is due to MI5 and the police facing difficulty effectively managing over 20,000 “former subjects of interest” (SOIs) in Great Britain.

But also the recent knife attack in Reading has raised concerns.

This is according to July’s report from Pool Re Solutions – a specialist division of the terrorism reinsurer.

SOIs are individuals who have garnered the attention of authorities but are not actively monitored because of resourcing constraints or other operational priorities.

Coates said: “It is an invaluable resource for our members and their policyholders who will be able to read timely roundups of current terrorism concerns and issues, analysis of the threat and expert advice on risk mitigation.

“We are pleased to launch this new product to complement the other tools and resources that we offer, which include other recent innovations such as an increased discount for using our VSAT tool.”

Educating brokers

The report will provide news and advice on the latest terrorism threats or arrests, trends and expert timely updates and research.

It is part of a suite of tools available to both member insurers and its policyholders. And it also touches on Covid-19-related restrictions which have led to vulnerable individuals becoming reclusive and spending more time online.

This it states has in turn made these individuals more susceptible to being remotely radicalised by extremist organisations.

Pool Re works closely with Biba, and it does a significant amount to educate brokers in selling terrorism cover to clients.

Coates said the main challenge for brokers is trying to convince clients there is a real risk.

In 1993 when Pool Re was founded policyholders were required to buy a separate top-up policy for which an additional premium is paid.

He added: “Of course as soon as you introduce a separate transaction and an additional charge into any insurance arrangement then people are going to thing ‘do I need that?’ ‘can I afford it?”

Before 1993 terrorism did not exist as an insurable standalone risk, so everyone had cover for explosions for a terrorist act as it was not excluded.

However, after 1993 the (re)insurance market said that it was unable to cover this anymore – and Pool Re was born.