The global economic impact of terrorism reached $89.6 billion two years ago.1 Following the September 11 attacks in New York, related insured losses were in excess of $40 billion and the city paid $21.8 billion to replace buildings and infrastructure.2 Acts of terror are unfortunate, devastating perils for which businesses can rarely plan, making Terrorism Coverage a must.
A recent attack with a truck in Manhattan has raised questions again on how to protect clients.
How to prepare
Terrorism insurance covers physical property damage and business interruption expenses resulting from terrorist acts. The inclusion of this coverage is often underestimated, according to Timothy Guiltinan, Executive Vice President, Global Excess Partners.
Should clients encounter property damage or business interruption as a result of an act of terror, a Stand-Alone Terrorism policy can more efficiently render payments that can aid clients in resuming to a more normal state of business.
Since acts of terror are often unforeseen, it is quite difficult to prepare for any terrorist activity.
“Terrorists have broadened their methods to not just use explosives and other weapons,” said Guiltinan. “They often find different methods to carry out an event, and they are not always obvious. Now, everyday items like vehicles are being used.”
Should clients encounter property damage or business interruption as a result of an act of terror, a Stand-Alone Terrorism policy can more efficiently render payments that can aid clients in resuming to a more normal state of business.
Guiltinan added, “An educated broker offering corporate solutions should certainly be discussing the benefits of Stand-Alone Terrorism coverage with their clients.”
TRIPRA
The Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIPRA) lends public and private compensation for certain insured losses resulting from a certified act of terrorism. Oftentimes, a broker’s clients are aware of TRIPRA and believe they are adequately protected against the economic impact of a terrorist attack through it. However, not all attacks meet TRIPRA’s strict standards, which can leave clients without the complete financial protection they may require.
TRIPRA requires that losses related to an act of terrorism reach a minimum of $5 million in order to meet its certification threshold to trigger coverage. Therefore, the recent vehicle attack in Manhattan would not certify under TRIPRA and clients without a Stand-Alone Terrorism policy would have to handle the resulting financial loss themselves.
“Brokers should understand and communicate to their clients the differences between Stand-Alone Terrorism coverage and TRIPRA,” said Guiltinan. “Stand-Alone coverage is a viable and cost-effect alternative, as there is nothing TRIPRA offers that Stand-Alone Terrorism insurance cannot provide.”
Location
While specific locations have a higher exposure for terrorist attacks due to a political relevance, brokers should advise their clients that an attack can take place anywhere.
“It’s important for brokers to understand that acts of terrorism are not isolated to major metropolitan areas and large trophy properties anymore. An event can occur anywhere and affect anyone,” said Guiltinan.
“The frequency in acts of terror is also increasing in the U.S.,” said Guiltinan. Between 2001 and 2009, terrorist attacks or plots against the U.S. had increased from 27 to 68.3 Additionally, there was a 650 percent increase in fatal terror attacks on people living in the world’s biggest economies in 2015.4
“If a client is looking to protect property for physical damage or business interruption, the most efficient and holistic coverage would come with a Stand-Alone Terrorism policy,” said Guiltinan. “This coverage works particularly well for smaller companies as there is a much lower risk threshold. Brokers can place fairly low deductibles – as low as zero on some products.”
Large, global businesses are more likely to be prepared for an act of terrorism. However, with the changing tides of how and where these events occur, all businesses have a potential to be affected. Brokers and agents can help smaller companies become more educated on available policies in the case of one of these unfortunate instances.
