The boss of Pool Re, the state-backed terrorism insurance lifeboat, warned the government 18 months ago it could not cover losses from a London Bridge style attack.
Hundreds of restaurants, traders and other businesses suffered huge financial losses after police cordoned off the historic Borough Market and surrounding areas for 11 days in the wake of the London Bridge attack two months ago.
Many firms have been unable to recoup losses from insurers because of a structural quirk in Britain’s terrorism insurance sector.
Companies have been told losses are only covered for physical damage rather than business interruption.
“We need to amend the cover to cover this situation,” Pool Re chief executive Julian Enoizi told City A.M..
We are talking to the government. We were talking to them 18 months ago, we saw this coming in France and Germany.
Pool Re was set up by the government in 1993 in the wake of a spate of terrorist attacks hitting buildings in particular. It was set up to provide insurers with the critical reinsurance required for them to operate.
But more recent terror attacks, such as those in London Bridge, Westminster and Paris, have attempted to maximise human damage. While terrorists have changed their focus, the associated reinsurance market has not.
Southwark MP Neil Coyle said: “It’s a different kind of attack and it’s not properly covered by the government’s Pool Re system.
"Pool Re needs to be given the ability to do more."
Darren Henaghan, the managing director for Borough Market, said the “vast majority” of the organisation’s 153 businesses are still in negotiations with insurers over compensation.
Coyle said traders were hampered by delays by the government in officially declaring the attacks that of terrorism.
He said: “Whilst ministers and Theresa May called it a terror attack on the day, it still took three weeks for proper certification to go through.
“The certification period is 21 days for the government to declare what is and isn’t a terrorist attack. That obviously needs to change; it is completely out of date.”
A spokesperson for the Treasury said: ‘We are committed to ensuring that businesses can protect themselves against disruption caused by terrorism. There is nothing in law that prevents insurers from providing cover for other types of terrorism risks, for example where no physical damage occurs.
However, we understand that these policies are not commonly offered or bought. We are in active discussions with Pool Re and other interested parties to look at all the possible options to close the insurance gap.
Enoizi added: “I do not want to be in a position where a similar kind of thing occurs again in the future – and that future could be tomorrow for all you and I know – where I am being phoned up and ask: ‘What the hell are you doing? Why is the insurance industry dragging its feet?’.
In this instance, the insurance industry is doing nothing wrong. It can’t pay for something that isn’t covered by an insurance policy.
Henaghan said Borough Market losses were £1.4m at the “absolute minimum”.
And both Coyle and Henaghan said businesses had received confusing messages from insurers.
Coyle said: “There was one firm who told one company they couldn’t pay until it was certified as a terror attack. And another company was told they wouldn’t get any money because it was a terror attack. Two different clients from that one insurance firm were being told different things.”
Meat wholesaler losses hit £30,000
Sean Cannon of Cannon & Cannon at Borough Market said stock, trade and employment costs losses as a result of the London Bridge attacks had hit nearly £30,000.
The company – a wholesaler and retailer of cured British meats – was particularly badly hit by the market closure as it uses the market as a head office for a business that supplies 150 restaurants nationally.
The company remains hopeful insurers will pay out. But in the meantime, it said it has lost one of its biggest annual supply contracts – simply because it was unable to trade during the period of the intense police investigation.
Sean Cannon said: