UK - Beneficiaries of scheme members killed in a terrorist attack may get only 10% of their benefits because insurers are capping catastrophe cover, experts warn.
Insurance brokers say the threat of more large-scale terror attacks has forced life insurers to reduce their exposure to such claims – a move that could slash death-in-service payouts.
Most now place “single event limits” on the amount of death-in-service benefits they pay to hedge themselves from the multi-billion pound losses they suffered after the attack on the World Trade Centre in New York.
Jardine Lloyd Thompson group risk services director Clare Dare said this could leave beneficiaries without their promised pension payouts. “Individuals assume that, in the event of their death, beneficiaries will be provided for according to the benefits afforded under the scheme.
“But following September 11, and more recent terrorist activity, the life assurance market has been re-evaluating how it assesses the potential loss from one event.
“We are seeing schemes with a £200m insurance policy only covered for £35m for a big claim. “Trustees are very concerned about it.”
Dare said life assurers were imposing the caps primarily for firms where the majority of scheme members were located in a large office building in areas such as Canary Wharf, the City of London, Manchester and Birmingham.
As a result, JLT has developed a facility that will provide cover up to £150m for events including chemical, biological and nuclear terrorism.Each risk will be individually underwritten and the cost and additional limit capacity dependent on several factors.
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