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Risk in Context

How Your Company’s Location Affects Its Terrorism Insurance

Posted by Christopher Flatt August 11, 2016

Do you have a lot of employees in or around a major metropolitan area? If so, concentration risk may be a concern when it comes to terrorism insurance and keeping your employees safe.

Property Terrorism Trends

A company’s location is a key influence on how terrorism insurance and workers’ compensation programs are structured. For example, companies in central business districts of major metropolitan areas are considered to be at higher risk for terrorism. Organizations in such areas generally purchased more property terrorism insurance than elsewhere.

Employee locations and concentrations can also be significant factors in how workers’ compensation coverage is priced and structured.

Workers’ Compensation and Terrorism Risks

Workers’ compensation insurance is different from property terrorism insurance. Workers’ compensation insurers cannot exclude terrorism-related losses — employers are required to buy it. Insurers carefully select the workers’ compensation risks they insure as they manage their overall portfolio exposure. And large employee concentration exposures and the associated loss potential are key factors in the underwriting and pricing of that risk.

Industry, Location, and Insurance Pricing

A company’s industry can affect where it locates, which in turn can also affect insurance pricing.

Property terrorism insurance take-up rates — the percentage of companies buying property terrorism insurance — vary widely by industry, according to Marsh’s recently released 2016 Terrorism Risk Insurance Report.

For example, media companies — many of which are located in New York City, Washington, DC, Chicago, and other major metro areas — purchased property terrorism insurance at a higher rate (79%) than did those in any other industry segment. Media companies also saw a 30% increase in their take-up rate from the previous year, the most of any industry.

Education organizations had the second highest take-up rate — 75% — in 2015. Take-up rates for education organizations increased significantly in the Northeast, likely because many schools, colleges, and universities are located there.

Risk Differentiation and Insurance Pricing

For companies with large concentrations of employees in urban areas or campus settings, accurate data and risk profile differentiation is crucial to underwriting submissions. As insurers strive to understand your risk, you should provide them with:

  • Payroll data by location.
  • The number of shifts at a location.
  • Campus settings.
  • The number of telecommuters.
  • The maximum numbers of employees in particular buildings at a given time.

Work with your insurance advisor to provide high-quality data to underwriters. It can make a significant difference in how insurers evaluate and price your organization’s terrorism risk.

Christopher Flatt

Christopher’s current responsibilities include the management of Marsh’s dedicated Workers’ Compensation Center of Excellence, which is part of the US Casualty Practice.