Following a vote by Motor Insurance Bureau (MIB) members UK motor insurers will pool terrorism claims from the beginning of 2019 to cover third-party claims where terrorists use vehicles and cause death or bodily injury.1
Under the agreement, insurers will pay a levy to the MIB so that costs are shared across all insurers should an insured vehicle be used in a terrorist attack. This is an extension of the Bureau’s existing agreement to handle claims from victims of uninsured drivers and untraced motorists.
This new agreement is especially timely, as the introduction of driverless cars may potentially increase the likelihood of this sort of attack by allowing terrorists to carry out remote attacks in the near future.
While this may seem like fearmongering or science fiction, studies by experts from Oxford’s Future of Humanity Institute, Cambridge’s Centre For the Study of Existential Risk and OpenAI, have stated that the AI in these vehicles presents a “clear and present danger”2 and could become a threat within just ten years. While AI technology is still under development, it provides an opportunity for terrorists to hack and take control of autonomous vehicles – a problem which can only be fixed by further testing as the vehicles continue to be developed.3
Successful vote to pool resources
All underwriters of motor insurance in the UK are members of the mutual arrangement under the MIB. Following a consultation and vote, members met the 75% threshold required to extend the MIB’s existing role to meet terrorismrelated third-party motor claims. The bureau said it may consider reinsuring the new liability.
Dominic Clayden, Chief Executive at the MIB, said:
“Those who are innocently caught up in events where terrorists drive vehicles into people to injure and kill, can rely on [the] MIB to pay and handle their motor related claims for these terrible events.”1
The move follows two extremist attacks in the UK last year, and similar attacks in Europe, where terrorists used vehicles to cause death and bodily injury. Both incidents on Westminster Bridge and London Bridge exposed complications when compensating victims under current third-party insurance arrangements.
“Insurers of vehicles are unlikely to have any policy or legal obligation to pay victims of a vehicle-based terrorism attack. It is however only right that victims have a route to compensation and at the moment that is via the MIB agreements,” the MIB said. “However, by virtue of the MIB articles where there is a policy in place on the vehicle involved, individual insurers and their reinsurers are exposed to the costs of such incidents.”4 - Motor Insurance Bureau
Vehicle hire and passenger transport implications
By closing the gap in who has a legal obligation to compensate victims in terrorism, the issue of how most terrorist vehicles are obtained through self- drive hire (SDH) instead of being privately owned is patched. Rental companies cannot anticipate how their vehicles are going to be utilised, and while there is a call for increased background checks5 and a higher rental cost these are unlikely to deter the most determined terrorist. In fact increased rental costs are only likely to impact on the owners of fleet rental and other similar businesses, as well as those genuinely seeking a hire car.6
SDH Fleet businesses are not the only ones that should be concerned about the risk of vehicle driven terrorism and the effect this can have on their reputation and liability. As while it may not have occurred yet, if utilised in a deliberate vehicle driven terrorism event, passenger transportation such as buses and coaches have the potential to inflict mass injury and damage.
This is in part the reason why MIB said clarity was needed to define liability for victims of such attacks and proposed changes to its Articles of Association, which govern the MIB’s role.
Steve Maddock, Chairman of MIB and Chief Operating Officer at Direct Line Group, said the market overwhelmingly backed the move to mutualise terrorism risks.
“The motor insurance market has clearly signalled that it was right to consider if individual insurers or the market as a whole carry the risks associated with motor claims arising from terrorist attacks. The outcome of the vote indicates strong support to mutualise the risk and enable MIB to act in the event there are further terrorist activities. It is a good outcome for the industry and the public and one which is supported by the Department of Transport.”1
Solving vehicle terrorism exposures
The International Underwriting Association (IUA) welcomed the vote to mutualise terrorism claims after raising the issue at the beginning of last year. The IUA’s casualty treaty group found that quantifying and pricing terrorist risks was complicated, and unlimited exposure from a single event could fall on just one or two reinsurers.
Chris Jones, Director of Legal and Market Services at the IUA, said:
“The mutualisation of motor terrorism risks promises an effective answer to a market problem that IUA members have been concerned about for some time.”
“Our casualty treaty group has liaised closely with the Motor Insurance Bureau and the Association of British Insurers as the solution has been explored and we look forward to a detailed arrangement being operational soon”7
Mark Armitage, Managing Director – National Broking & Placement at Gallagher commented:
“This is a great example of the industry standing together to protect the public. The potential magnitude of these claims could be too much for insurers to bear on their own. By pooling their resources they can continue to protect society.”
Gallagher crisis resilience support
The new MIB pool terrorism solution is not the only way to help safeguard against a crisis. Available to any sized business the Gallagher Crisis Resilience product for example, can provide support in the event of a terrorist attack using a vehicle. It offers 24/7 access to crisis consultants and emergency funds during the event and post-event trauma counselling and business recovery advice.
In addition, your business can be directly or indirectly prevented from operating due to a police cordon or damage, business interruption cover can be extended to help prevent loss of earnings from a terrorist act even where no damage occurs.
1. www.mib.org.uk/media-centre/news/2018/july/uk-motor-insurers-vote-to- mutualise-risks-for-terrorism-claims/
2. www.telegraph.co.uk/technology/2018/02/21/terrorists-could-use-driverless- cars-carry-atrocities-oxford/
3. www.mcclatchydc.com/news/nation- world/national/national-security/article193616539.html
4. www.mib.org.uk /mib-insight/the-impact-of-terrorism-on-the-motor-insurance-industry/
5. www.theguardian.com/uk-news/2017/aug/20/uk-extra-checks-for-van-hire-to-deter- terrorist-attacks-watch-list#img-1
6. www.fleetnews.co.uk/news/fleet- industry-news/2018/01/30/use-of-hire-vans-in-terror-attacks-may-result-in- rental-price-increase