Insurers are being urged to rethink their blanket exclusion of chemical attacks after the March 4 poisoning of a former Russian double agent in the English city of Salisbury triggered uninsured business interruption losses for local firms.
Sergei Skripal and his daughter Yulia were found unconscious on a park bench in Salisbury after being poisoned with what the U.K. government and the Organization for the Prohibition of Chemical Weapons have said was Novichok, a potent nerve agent. The Skripals survived the attack, but more than three months later, some of the city's businesses continue to suffer disruption because of the investigations and clean-up operation.
Police on March 6 guard the cordoned-off area in Salisbury, England, where former Russian double agent Sergei Skripal and his daughter Yulia were found critically ill two days earlier.
Yet those affected are highly unlikely to be able to claim the resulting business interruption from their insurers, because chemical, biological, radiological and nuclear, or CBRN, attacks are excluded from commercial insurance policies.
"There are certain eventualities that are invariably excluded by all commercial insurance policies, two examples of which are war and the use of CBRN," U.K. government-backed terrorism reinsurer Pool Re said in its April quarterly terrorism report. Pool Re-backed terrorism policies and some others do cover CBRN attacks, but the report pointed out that the Salisbury poisoning "is not terrorist in nature and is unlikely to be certified as a terrorist attack by the U.K. government."
In addition, many commercial policies, whether they cover terrorism or not, require a physical loss to property to trigger business interruption cover. The new Counter-Terrorism and Border Security Bill on its way through the U.K Parliament will, among other things, expand Pool Re's remit to cover business interruption where there has been no physical property damage. But as the Salisbury attack is not a terrorist event, even this extension, had it been in place, would not help.
"There is clearly a vulnerability here that is leaving policyholders between two stools, and I think the answer has to be that there needs to be a bit of a shake-up or a rethink as to how we can protect businesses in events such as these," said Alexander Rosenfield, an associate at law firm Fenchurch Law who represents insureds in business interruption coverage disputes.
Rosenfield's comments echo those made by Pool Re's chief underwriting officer, Stephen Coates, and analyst Camilla Scrimgeour. They wrote in Pool Re's April report that "[s]ince it seems possible that techniques, thought formerly to be restricted to nation states and deployed during a conflict, may be used by others in a more restricted and localized manner, it may be useful for insurers and reinsurers to consider if their historical perspectives on certain scenarios should be re-examined."
A spokesman for U.K. risk managers association Airmic added in a statement to S&P Global Market Intelligence: "The attitude of the insurance industry towards the small businesses that have been damaged by the Salisbury incident through no fault of their own is disappointing and indefensible."
It is unclear what the business interruption cost of the Salisbury poisoning will be. Neil Coyle, Labour member of Parliament for the London constituency of Bermondsey and Old Southwark, told Parliament on June 11 that the total cost to the 150 affected businesses from the June 3, 2017, terrorist attack on London's Borough Market, which suffered a 10-day closure, "is estimated to be more than £2 million."
The Salisbury attack affected fewer businesses but for a longer period. Rosenfield acknowledged in an interview that it was difficult to calculate potential losses, particularly as businesses could be feeling the hit long after the event because of reduced tourism over contamination fears.
"I don't think you are looking at millions and millions but potentially the losses could be significant," he said. "These businesses may ultimately be shut down as a result."
A police cordon and fence in front of the Zizzi restaurant in Salisbury, which Sergei Skripal and his daughter Yulia visited just before they were found unconscious March 4. The restaurant remains closed more than three months after the attack.
The walkway to the Maltings shopping center, near where the Skripals were found, reopened to the public May 26, according to Wiltshire Council, but the Greene King-owned Mill pub and the Salisbury branch of restaurant chain Zizzi, which the Skripals visited before they were found unconscious, remain closed more than three months after the attack.
Alistair Cunningham, chair of Wiltshire Council's recovery coordinating group, said in a statement that businesses near the cordons saw foot traffic drop 60% to 80%, while across the city, footfall fell by 15% in April. Tourism is down 25%, he added.
"Since this incident began on March 4, we have been working with Salisbury businesses to ensure they have support to help them recover. The support includes liaising with insurance providers," Cunningham said.
The disruption did not just affect big-name companies. Small, independent businesses behind the police cordon also had to close; the manager of one, B and R Textiles, told the BBC in April that he was losing between £12,000 and £15,000 a week.
Despite that, Rosenfield said it appears clear that insurance will not pick up the business interruption tab. "There aren't any obvious coverage disputes to my mind," he said.
A spokesman for the Association of British Insurers said in an email that coverage would depend on individual policy wordings, but added that "an incident like this may be excluded under any contamination or biological/chemical/act of war exclusion." He said the association's comment at the time of the attack was: "Speak to your insurer."
The industry's ultimate response will depend on whether such attacks become more frequent. International General Insurance Co. (UK) Ltd. political violence underwriter Joanna Cousins said in an interview: "It is a one-off at the moment, but certainly if we start seeing more of that type of thing, the market will have to change and try and find a solution."