If the purpose of the terrorist attack launched on 7 July in London was to bring the city to a juddering halt - it failed
What it did achieve was to take the lives of innocent commuters making their regular Thursday morning journeys into work. While the final death toll has yet to be confirmed, the figure currently stands at 52, with expectations that it will rise to 69.
Even though the sounds of police sirens continue to wail across London as the security forces respond to numerous reports of suspicious devices or suspect packages, the city has returned to business as usual. This is perhaps a reflection of the fact that London is no stranger to terrorist bombing campaigns, having been the subject of numerous attacks by the Irish Republican Army in recent decades. In 1993, a massive explosion in Bishopsgate claimed one life and resulted in insured losses of £650m, while the bomb attack on Canary Wharf in 1996 claimed two lives, with insured losses of between £100m - £150m.
In the immediate aftermath of the 7 July attack, according to the Business Continuity Institute, some 100 companies put their disaster recovery plans on standby, confirming according to the institute that companies had business continuity plans ready to implement in a crisis situation.
Further security is afforded the insurance industry in the UK through Pool Re. Established in 1993, Pool Re is designed to ensure the continuation of terrorism insurance cover for commercial property in Great Britain.
Pool Re is backed up by HM Treasury which affords the mutual reinsurer financial protection in the event that its financial resources are insufficient to meet claims demands in the aftermath of a terrorist incident. Pool Re has stated that at this stage it is not willing to comment on the recent attacks. However, the reinsurer has confirmed that members should contact them if they receive a claim that they believe to be the result of an act of terrorism.
While it is too early to estimate the potential insured losses from the series of attacks as the picture remains confused, initial reports suggest that the costs will be limited, with Lloyd's believing that insured losses will be low. In a statement issued by QBE, CEO Frank O'Halloran, said, "We are all deeply shocked by the loss of life, injuries and trauma caused to people following the terrorist attacks on the London transport system.
From an insurance perspective, incurred losses from this event are expected to be relatively small and for QBE, well within our substantial allowances for large losses and catastrophes."
Unsurprisingly, the assault on London has led to a redoubling of the calls for the renewal of the Terrorism Risk Insurance Act in the US, which is due to expire on 31 December 2005. While the recent findings of the US Treasury commissioned study into the effectiveness of the act, confirmed that the legislation had succeeded in achieving its temporary objectives of stabilising the private insurance market, the Treasury believed that extending the act in its current format would restrict further development of the insurance market "by crowding out innovation and capacity building".
A recent report conducted by the OECD stated that despite improved conditions in the terrorism insurance markets since 9/11 there are continuing shortfalls in coverage, which could be exposed if the market faced another large-scale attack. According to J Stephen Zielezienski, AIA vice president and associate general counsel, "The risk of terrorist attacks is ongoing, and so is the need for some form of public-private shared loss insurance mechanism beyond the Terrorism Risk Insurance Act's December 31 expiration date. The OECD report underscores the need for the US Congress to act so that we continue to have an economic safety net in place when TRIA expires."
Global Reinsurance would like to take this opportunity to thank all of those who have contacted us over the last few days to enquire about the well-being of all staff members following the terrorist attack.