Four Key Considerations in Developing Your Terrorism Insurance Program
Recent terrorist attacks have raised awareness — and concerns — about the vulnerability of potential "soft targets." And concern is never so high as it is following an incident. After each tragic attack — from Istanbul to San Bernardino to Paris — I receive an influx of calls from worried clients, many of them asking about terrorism insurance coverage.
Given the global interconnections of economic, social, and political risks, we’re seeing new vulnerabilities, with interstate conflict and terrorism at the forefront, a point articulated in the recently released Global Risks Report 2016. Meanwhile, many executives are worried about the threat of homegrown extremists, which has escalated dramatically in 2015, according to the Homeland Security Committee of the US House of Representatives.
Here are some key considerations in developing your terrorism risk insurance program.
Terrorism insurance is a key piece of financial protection for many businesses, and has been drawing increased attention as awareness of the risks rises. In a World Economic Forum (WEF) survey of business executives, terrorist attacks ranked third on the list of global risks of highest concern for doing business in the US, behind only cyber-attacks and data fraud.
In the US, the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) of 2015 is the federal terrorism insurance backstop. Enacted soon after the attacks of September 11, 2001, the Act has never been triggered; coverage kicks in only after covered losses pass $5 million. Yet TRIPRA has helped keep terrorism insurance costs relatively low and accessible for many companies.
Some insureds turn to the standalone terrorism insurance marketplace, which is often more competitive than the embedded coverage reinsured by the federal government through TRIPRA.
As you develop your terrorism insurance program, here are four key considerations:
1. Ensure the limits of insurance are adequate for your potential losses.
2. Review the location of your assets. Insurance costs are typically calculated based on your structure’s perceived terrorism risk or proximity to “trophy” properties such as monuments, stadiums, or iconic structures.
3. Understand the policy terms, conditions, and limitations of terrorism insurance.
4. Work with your advisors to understand your property and employee exposures so you can make informed decisions and mitigate potential losses.
As John Drzik, Marsh’s president of Global Risk and Specialties, said in comments about the Global Risk Report 2016: “Events such as Europe’s refugee crisis and terrorist attacks have raised global political instability to its highest level since the Cold War. This is widening the backdrop of uncertainty against which international firms will increasingly be forced to make their strategic decisions.” Terrorism insurance is one step to help your organization be ready for terrorism risk.
For more information, read Marsh’s 2015 Terrorism Risk Insurance Report.