Have you talked to your client about terrorism risks?

Acts of terrorism aren’t what they used to be. Not long ago, terrorists favoured large, iconic targets—but that’s not always the case these days. “It’s becoming more of a frequency issue than a severity issue,” Adam Posner, senior underwriter for terrorism and political violence with Allianz Global Corporate & Specialty (AGCS), told Canadian Insurance Top Broker.

“If we look at the trend of terrorism, obviously everyone can remember 9/11. Before that, in the U.K., there were attacks by the IRA, and there were pretty significant property losses,” Posner said. “But the trend has moved away from that iconic attack to lone-wolf attacks, to smaller-scale attacks and perhaps less predictable [attacks]. It’s not so much at iconic locations anymore—it’s affecting people and where people tend to gather.”

It has yet to be determined whether a recent bombing that injured 15 people at Bombay Bhel, a restaurant in Mississauga, Ont., was an act of terrorism. Nevertheless, the tragedy illustrates how unpredictable targeted acts of violence can be.

Businesses may want to consider purchasing terrorism liability coverage, which provides third-party coverage for bodily injuries and property damage resulting from acts of terrorism. But how can brokers convince small business owners of the risk of being impacted by terrorism? For one thing, they can stress how unpredictable terrorism is, Posner says.

“It can happen anywhere, so businesses need to think about that, and brokers can have that conversation with them,” he said.

Another consideration is that even if a business isn’t the direct target of an act of terrorism, it could still get caught up in the aftermath of a police investigation, leading to business interruption.

“The area may get closed down. There may be ingress and egress issues. They may be affected without directly suffering a loss,” Posner said. “Similarly, if they are reliant upon a supplier to bring in their goods, and the supplier can’t get to the location, then they’re going to suffer a business interruption loss.”

Furthermore, smaller businesses may not be able to recover from an act of terrorism as easily as a large business would.

“A bigger organization is probably going to have excellent business continuity plans. They may have several sites, so if one is affected, they may pick up the slack by operating more at other sites,” Posner said. “Whereas, if you’re an individual business—whether that’s the restaurant that was affected in Mississauga, whether that’s a boutique hotel, whether that’s a bakery—you may find it more difficult to recover.”

Some commercial liability policies specifically exclude acts of terrorism, but even in cases where terrorism isn’t excluded, Posner warns that insureds may not necessarily be covered if the worst happens.

“It’s always better to err on the side of caution and to have a specific policy that you know will respond, rather than ‘Maybe it will, maybe it won’t,’” he said. “Just to eliminate that grey area, it should give clients that peace of mind. Because ultimately, that’s what it comes down to: Can you sleep at night? There might be clients who can—they’re not too worried about it, and that’s fine. But I’m sure there are clients who, if that grey area is explained, would want to have certainty of coverage.”

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Copyright © 2018 Transcontinental Media G.P. This article first appeared in the June/July edition of Canadian Insurance Top Broker magazine

This story was originally published by Canadian Insurance Top Broker.