Understanding the Nuances: Terrorism and Political Violence Insurance Coverage
From Orlando and Nice to Bangladesh and Turkey, the last two months have seen a string of terrorist attacks and civil unrest around the world.
These events can have a devastating effect on your people, operations, and assets. Many companies look to terrorism and political violence insurance to help mitigate the financial impact, which can include property damage and business interruption. But choosing which coverage — or combination of coverages — is best for your organization can be tricky.
How the Coverages Work
The line between what is considered “terrorism” and what is considered “political violence” is often blurry. How insurers and governments distinguish between the two should inform the type of coverage you buy.
Here are general definitions for the coverages:
- Property terrorism insurance provides coverage for the physical damage and business interruption that can result from acts that are motivated by politics, religion, or ideology.
- Political violence insurance (PVI) provides coverage related to war, civil war, rebellion, insurrection, coup d’état, and other civil disturbances.
Among the considerations when determining which insurance program best suits your exposures to these risks:
- Ensure the limits of insurance that you buy provide enough protection for multiple loss scenarios.
- Review the location of your assets to determine the appropriate insurance solution.
- Understand the policy terms, conditions, and limitations of property terrorism and political violence insurance.
- Work with your advisors to understand your property and employee exposures so you can make an informed decision or mitigate potential losses.
Political Risk Insurance
It’s important to remember that property terrorism insurance policies do not cover all forms of political risk. Expropriation, forced abandonment or divesture, currency inconvertibility, nonpayment, and contract frustration will only be covered by another type of policy: political risk insurance.
There may be some interpretation about whether a politically motivated act of violence would be covered by political risk insurance, property terrorism insurance, or PVI. For example, should attacks by particular groups be classified as acts of terrorism or another form of political violence?
Sometimes, a combination of property terrorism insurance and PVI may be appropriate to protect against your specific risks. To help ensure that your coverages will work hand-in-hand and protect you in the event your company is affected by terrorism, political violence, or political risk, talk to your insurance advisors.
For more information on these topics, read Marsh’s 2016 Terrorism Risk Insurance Report.