Trying to sell terrorism cover to small businesses is difficult but necessary, says John Jackson
' Terrorist attacks do not discriminate: they cause immense damage to small retailers as well as multinational corporations, apart from life and limb.
Given the cost of terror cover, how do brokers persuade smaller firms to take out the appropriate level of cover or put in place often expensive risk management schemes?
What is clear is that business continuity cover is the very least that firms should have in place, as without it they will find it difficult - if not impossible - to stay in business, and key staff will go elsewhere.
A worrying factor is that so many companies seem totally oblivious to the problem. A Chartered Institute of Management report came up with the alarming news that only one firm in ten is prepared for disaster and disruption.
Some risk managers even believe the terrorism threat is exaggerated, although this view is not shared by the Metropolitan Police.
Insurers, meanwhile, try to quantify the risk. Zurich, for example, has set up Guard - Global Underwriting Accumulation Repository of Data - to identify terrorism maximum loss areas. Other methods include the world's first terrorism catastrophe bond, issued by the International Federation of Football Associations for next year's World Cup in Germany.
There may need to be extra government involvement, for example, through Pool Re, because clearly the effect of terror attacks has a wider implication than just insurance, involving economic stability and also affecting world markets, particularly foreign exchange.
Terrorism takes many forms, and includes attacks on companies involved in animal experimentation. Tourism, too, is involved, and Biba has set up a special policy with CNA that includes terrorism cover.
In the current unstable climate, a terrorist attack can happen anywhere.
UK-based insurers will no doubt be looking to see if the US authorities renew the Terrorism Risk Insurance Act (TRIA) which expires at the end of this year. The US Treasury is due to publish its views on the effectiveness of TRIA in June, which could give a strong indication as to whether it will become more permanent or just fades away.
But is terrorism any different from an insurance perspective to natural disasters such as Boxing Day's devastating tsunami, or the hurricanes which come with such alarming frequency? Little wonder that exclusions have become the familiar pattern within property insurance policies in particular.
But the nature of terrorism is changing, as the terrible events leading to the massacre of children in Beslan revealed. The discovery by police of 80 kilograms of radioactive isotopes in the Georgian city of Tblisi in 2003 shows how vulnerable major towns and cities can be anywhere in the world to the determined terrorist.
So it is a tough job for brokers to try and persuade businesses that terror cover is essential. When one considers all the other costs that brokers are facing, if something has to go, then "unnecessary" terror cover rises quickly to the top of the list. IT