When the Louvre kept its gates locked on Saturday, October 24, nothing inside had been damaged. The museum, along with the Musée d'Orsay, the Picasso museum and much of the city's cultural sector, closed as a precaution ahead of planned protests, a week after cost-of-living demonstrations spilled into looting and vandalism. Five days earlier, students had blockaded the Louvre's entrances and shut it for the day, and Art Basel Paris cancelled its weekend programme at the Grand Palais.
For any business weighing a similar decision, the insurance question is simple and the answer is uncomfortable. Tony Collman, property VP, speciality lines, at Intact Insurance, said a standard property damage and business interruption policy does not respond when a business closes because it fears unrest.
What usually decides it, he said, is who makes the call to shut.
Collman said a typical BI policy carries three extensions that can come into play when trading is disrupted: prevention of access following damage, non-damage denial of access, and loss of attraction. Each usually needs either physical damage or action by a relevant authority to trigger it.
Prevention of access is the simplest. If a fire next door to a retailer leads to the area being cordoned off, the shop is covered because damage has stopped customers reaching it. Non-damage denial of access goes further, responding where police set up a security zone or close roads, for example after a bomb threat linked to unrest, even though no property has been damaged. Even then, Collman said the incident usually has to happen close to the insured premises, often within a mile, and the cover tends to carry a time-based excess, such as the first 12 hours, rather than a monetary one.
"There's also usually a time limit on there, or a time deductible rather than your standard deductible, because time is always of the essence," he said.
Loss of attraction applies where a business stays open but a nearby incident drives visitors away. Collman said the cover grew out of shopping centres, where an incident at an anchor tenant can hit footfall for every smaller shop around it. It still needs a serious incident to have actually happened, and the business has to prove its footfall fell as a result. That means records of usual visitor numbers against the same period last year, with other factors such as the cost of living stripped out.
Where there is no damage, Collman said Intact's wordings require the closure to be ordered by a public authority, a condition designed to stop businesses claiming for disruption that never arrives. Social media can whip up a frenzy around an event that may never happen, he said.
Protest groups publishing their plans in advance does not change that. London's marches are well publicised by police, Collman said, yet very little closes for them.
The result is an awkward incentive. "It's unfortunate because in a sense you're encouraged to stay open," Collman said. If unrest then damages the premises, a material damage claim follows and the BI cover with it. Where police do advise closure, he said they tend to issue formal notices rather than a word at the door, and that authorities work well with insurers because much of the decision comes down to public safety.
Insurers also have to be careful about how far cover extends, Collman said, because some disruption nearby, such as roadworks, is simply part of everyday life.
The same logic applies when staff or customers cannot reach a site. Collman said a train strike that stops employees getting to work is not an insured peril, so no trigger is met.
For risks like these, he said the answer lies in the specialist parametric market, which Intact does not write. A parametric policy pays out when an agreed event occurs and agreed conditions are met, such as a measurable drop in footfall. He cited a major British supermarket whose cover is triggered when the Met Office issues an amber weather warning and drops compared with the same period the year before.
"So it's not about did the insured damage occur, but did the agreed event occur?" he said.
A business worried about civil unrest could arrange cover on the same basis, Collman said, though that decision has to be made before the event, not after it.
For clients weighing a closure now, he said brokers should sit down with insurers to agree clear guidelines on what closing would mean for the policy, and encourage clients to speak to their local public authority to understand exactly what is being asked of them. "I would always make it a tripartite decision between insurance company, broker, and the customer," he said.
The cafés and kiosks around a closed landmark are in a similar position, losing trade from a decision that was never theirs.
Collman said it is the small high street shop, rather than an institution like the Louvre, that he has in mind when he thinks about this gap. He said events like these are becoming more common, and the conversation about what a policy will and will not pay for is one brokers are better having before the next protest date is announced than after it.
