UK terrorism reinsurer Pool Re says intensive talks have been held at ministerial level to extend its cover as attacks aimed at causing mass civilian casualties mark a fundamental shift in Islamist extremist tactics.

The majority of terrorism insurance policies are based on traditional property-focused attacks and require physical damage to trigger a claim, the reinsurer says.

“This creates gaps in insurance coverage as recent terrorist events, while they have caused significant loss of life, have also resulted in severe disruption to business and associated financial losses, but with minimal or no damage to commercial property,” Pool Re CEO Julian Enoizi said.

The changed nature of the attacks has also highlighted exposures by the SME sector, which is not as well placed to absorb losses.

Events in Europe suggest SMEs could be impacted for between three and nine months, either by an event or the perception of reduced security. They could suffer losses ranging from 5-30% of their annual revenue, Pool Re says.

Mr Enoizi says Pool Re had been working to fill the previously unforeseen coverage gap since attacks in Europe last year, but extending the cover would require a minor change of law.

“One proposed model would see non-damage business interruption insurance resulting from terrorism offered to the market and covered indirectly by the commercial market through reinsurance of Pool Re,” Mr Enoizi said.

“Such cover would be inexpensive, widely purchased, and with specific discounted rates for SMEs.”