Bombings in London underline insurer transit system liability.

The July 7 bombings that killed more than 50 people on London's mass transit network underlined the vulnerability of systems that depend on open access in order to function. The great unknown in London, and major cities around the world, is when the next attacks might come. London has responded with a high level of alert, with police saturating subway and commuter rail stations.

William Farmer, a director of Aon Crisis Management in London, said the broker has received some interest from mass transit systems since the London attacks. Speaking of prospective clients, Farmer said, "Their first port of call would be asking their existing property and liability insurers to include terrorism"

Exclusions imposed by underwriters after the Sept. 11, 2001, terrorist attacks on the United States contributed to the growth of the standalone market, in which insurers underwrite terrorism as a specialty.

The July bombings reinforce likely terrorism exposures. "People had become a bit complacent," Farmer said.

Insurers regard mass transit systems as potential targets. "Security is very difficult because you can't easily screen every single person in detail," he said.

When underwriting transit systems they aren't familiar with, insurers turn to brokers for information about the existence of physical barriers, procedures that may be in place for dealing with suspicious packages and details of post-event contingency plans, Farmer said.

A broker can provide valuable eyes and ears. Aon Ltd., which is part of the United States-based Aon Corp., has analyzed the emergency plans of mass transit systems, sharing its conclusions with underwriters.

Stephen Ashwell, an underwriter with Hiscox's Syndicate 33 at Lloyd's, suggested that the stand-alone nature of terrorism cover means that the underwriter's product is only as good as the exclusions that made the coverage necessary in the first place. "We are there to fill the gaps," he said.

Ashwell said there has been increased interest in insurance for mass transit systems with inquiries coming in from around the world, following the London bombings.

Farmer said the London bombings demonstrated the difficulty that security services have in infiltrating groups made up of so-called clean skins; that is, people who were not previously known to them.

The attacks on London had been predicted, and no one was in doubt as to the attractiveness of the transit system as a target. "I think one lesson that hasn't been learned is how easy it is to take a bomb onto a train," Farmer said.

Farmer has described business-interruption cover as a "huge issue" for mass transit systems. Transport for London, which is responsible for London's subway and bus system, has revealed that it did not have business interruption cover. As a result, the system could not recoup revenue that was lost as a result of the disruption. Transport for London did not respond to an interview request for this article.

Business interruption is complicated to write. For instance, a bomb in a backpack would not be expected to cause extensive, and costly, structural damage, Farmer said, noting that an incident at a key point could cripple large parts of a system.

Aon recently obtained full cover for vital sections of a system for which it was representing. "But in order to do that, we had to present the underwriters with a report analyzing what the business interruption claims might be arising from damage at key locations," Farmer said.

John Hagger, senior property broker at Marsh U.K. in London, said that business-interruption cover can be difficult to buy for overland rail systems. Not only is this market limited in size, Hagger said, but "there are very few insurers who are looking to write rolling stock business in general."

Marsh is a unit of Marsh & McLennan Cos.