At least 45 businesses were damaged in the Christmas Day bombing in Nashville, Tennessee that decimated a block of downtown buildings. Local police and the Federal Bureau of Investigation (FBI) are still investigating why a 63-year-old Nashville area information technology consultant set off the explosion in his RV, killing himself and causing widespread destruction.
The bomb was detonated near an AT&T telecommunications hub, temporarily freezing mobile and internet systems in five states. As affected business owners assess the damage to their properties, they are also questioning whether their insurance policies will cover the repairs.
Law enforcement has not yet determined whether the bombing will be designated as an act of terrorism; legal authorities say this label generally requires an ideological motive for the violence. If it is classified as terrorism, property owners without appropriate insurance coverage worry they may have to pay out of pocket for the damage.
“Commercial Property Insurance policies often contain exclusions for acts of terrorism,” said Carolyn Reiter, Associate Vice President, Global Excess Partners, New York, New York. “If the FBI determines the Nashville incident is an act of terrorism, those impacted may be denied coverage through their current Commercial Property Insurance policies.”
Terrorism Insurance coverage is available through a standalone policy or the federally-backed Terrorism Risk Insurance Program (TRIP),1 authorized by the Terrorism Risk Insurance Act of 2002 (TRIA) in the wake of the September 11, 2001 attacks and extended through 2027 by the Terrorism Risk Insurance Program Reauthorization Act of 2019 (TRIPRA).2 Nevertheless, many business owners have no Terrorism Insurance coverage at all, leaving them vulnerable at a time when terrorism is an escalating concern.3 and businesses are already struggling to survive in a pandemic-induced recession.4
Small-scale and isolated terrorist acts are happening on a more frequent basis—they cause tragically high numbers of fatalities as well as property damage.
“Small-scale and isolated terrorist acts are happening more frequently—they cause tragically high numbers of fatalities as well as property damage,” said Lalita Mohabir, Product Specialist, Personal Accident, Burns & Wilcox, Toronto, Ontario. Indeed, such acts occur regularly in both the U.S. and Canada.5 “The belief that terrorism will not happen in a given place has been proven false time and again,” stressed Mohabir.
TRIPRA coverage has considerable minimum loss thresholds
In the U.S., any quote for Commercial Property Insurance must include an offer of coverage through TRIPRA. Under the terms outlined by TRIPRA, only events certified for insurance purposes as acts of terrorism by the U.S. Treasury Secretary—in conjunction with the Secretary of State and Attorney General—are eligible for coverage. In the initial 2002 statute, such certification required a minimum of $5 million in aggregate property and casualty damages from an event, Reiter said. That minimum loss threshold has since increased dramatically: beginning in 2020, the aggregate losses resulting from an act must exceed $200 million to qualify for certification as an act of terrorism under TRIPRA.6
Although it must be offered as part of a Commercial Property Insurance quote, TRIPRA coverage comes with an additional premium and can be declined.
“Many property owners reject the TRIPRA option because it is not very broad coverage,” Reiter explained, adding that “TRIPRA requires an event to be certified by the government as an act of terrorism in order to qualify for coverage—this certification is rare.” The April 15, 2013 Boston Marathon bombing, Reiter pointed out, was never certified an act of terrorism under the terms outlined by TRIA.7
The attack in Boston led to a reported total $2.1 million in losses, far below the $5 million aggregate loss minimum at the time the incident occurred.8
TRIPRA requires an event to be certified by the government as an act of terrorism in order to qualify for coverage—this certification is rare.
Business owners who lack adequate Commercial Property or Terrorism Insurance coverage could face substantial uncovered losses from an incident that does not meet TRIPRA’s current minimum for aggregate losses. “In Nashville, the losses sustained by the affected businesses could very well fall short of TRIPRA’s minimum for certification,” Reiter said. “Many of them are smaller operations and even when combined their losses are unlikely to hit that minimum.”
Standalone policies: No minimum losses or certification required
Terrorism Insurance can be purchased as a standalone policy—without a minimum loss requirement. Such policies include broader definitions of acts of terrorism that do not require government certification, Reiter said.
“A Terrorism Insurance policy can be obtained at any time and does not need to be aligned with any other coverages,” she explained. “A business we underwrite for a $5 million Commercial Property Insurance policy could typically elect to purchase a Terrorism Insurance policy for the same amount. There is no minimum loss requirement for a Terrorism Insurance policy—the deductible could, for example, be $10,000 or even $5,000.”
Coverage under a standalone Terrorism Insurance policy can also include loss of business income such as could occur during a forced closure due to property damage or to allow a criminal or forensic investigation to take place. Terrorism Liability Insurance is another important consideration, providing coverage for bodily injuries or deaths that may occur on a business’ premises due to terrorism.
Compared with TRIPRA coverage, a standalone Terrorism Insurance policy could mean a faster recovery for business owners in the aftermath of a terror attack, Reiter said. “There is typically a significant lag time to process claims and issue payments under a government-backed program, especially compared to a general insurance claims transaction,” she explained. “Coverage under a standalone Terrorism Insurance policy could help a business start recovering from an attack much sooner.”
In Canada, standalone Terrorism Insurance is available to cover losses due to terrorism or sabotage, including acts committed for political, religious or ideological purposes. Business interruption coverage can also be included for disruptions related to direct physical loss or damage, Mohabir said.
“Terrorism and Sabotage Insurance coverage is available for physical damage to fixed and mobile assets caused by war, malicious damage, strikes, riots and civil commotions,” she noted. “It also offers help with expenses related to claims of liability for bodily injury and property damage caused by an act of terrorism.”
Business owners in Canada may obtain Terrorism Insurance coverages for property and liability individually or those coverages can be combined in one policy, Mohabir said.
Attacks on the rise and small towns not immune
As of January 5, at least two buildings affected by the Nashville bombing will be demolished due to irreparable structural damage and 10 were deemed unsafe for use or occupancy.9 At the Old Spaghetti Factory on 2nd Avenue, losses were expected to reach $1 million or more; a spokesperson pointed out the restaurant contained many antiques and collectibles.10
Although terrorism-related deaths are on the decline globally, researchers at the Institute of Economics and Peace reported far-right attacks are rising in many areas, including a 250 percent increase over the past five years in North America, western Europe and Oceania.11
“What can be considered terrorist events have risen dramatically over the last 10 to 15 years and more are taking place in smaller cities,” Reiter said. “Yet so many still believe it will never happen to them.”
Mohabir agreed, saying business owners often believe they will not be affected because they operate in “a small town” or other “peaceful” location, she said. “I encourage them to become aware of current trends,” Mohabir emphasized. “Terrorism Insurance is a valuable asset and can be customized to suit almost any budget.”
Terrorism Insurance is a valuable asset and can be customized to suit almost any budget.
Standalone Terrorism Insurance is typically more affordable than standard TRIPRA coverage, Reiter added. While insurance choices ultimately depend on a business owner’s risk tolerance, she said, Terrorism Insurance is a wise investment — especially when compared to potential uninsured losses.
“I cannot imagine that at a time like this, given the economic hardships brought about by the coronavirus pandemic, how a business could survive losses like that,” she said.
Get expert advice, risk assessment for optimal coverage
Business owners should speak with their insurance broker or agent about whether they are insured for acts of terrorism and how their coverage works. Many business owners are not aware of the differences between coverage under TRIPRA and standalone Terrorism Insurance and may not know both options exist, Reiter noted.
“Business owners may not realize anything other than TRIPRA coverage is available,” she said. “The biggest misunderstanding is that TRIPRA coverage will protect business owners in the event of any event perceived as terrorism. The reality is that TRIPRA may very well offer no coverage at all for events like the Nashville bombing.”
Though acts of terrorism are unpredictable, business owners can be better prepared for any loss by keeping detailed records of their business contents, including accurate valuations and appraisals for antiques and other big-ticket items. “Storing records electronically or off premises is important as well, so that they will not be destroyed in the event of structural damage,” Reiter said.
The biggest misunderstanding is that TRIPRA coverage will protect business owners in the event of any event perceived as terrorism. The reality is that TRIPRA may very well offer no coverage at all for events like the Nashville bombing.
It is “incredibly important” to work with a broker or agent who is up to date on the latest insurance offerings, she said. “That is really going to protect you in the event of any loss of any type,” Reiter said. “While it is ultimately up to business owners whether they choose to invest in Terrorism Insurance, experts will provide them with the best options available to protect their assets.”
While any business can be affected by terrorism, some operations are at greater risk, Mohabir pointed out. “A Terrorism Insurance policy may be advisable for certain advertised events like concerts, sit-down conversations with high-profile individuals or conventions,” she said.
“Most importantly, we all need to remember the caveat: ‘see something, say something,’” Mohabir said. “Perpetrators often convey their thoughts and intentions to others in advance of committing terrorist acts—sadly, many do not speak up until it is too late.”
Sources 1 U.S. Department of the Treasury. “Terrorism Risk Insurance Program.” 2 U.S. Department of the Treasury. “TRIA Consolidated Statute." 3 Jones, Seth. “The Escalating Terrorism Problem in the United States.” Center for Strategic and International Studies, June 17, 2020. 4 Mohesky, Veronica. “COVID-19 could be the worst economic crisis since the Great Depression.” PolitiFact, December 11, 2020. 5 Lejtenyi, Patrick. “The language used to describe ‘homegrown terrorism’ reveals as much about those who coined it as it does about Canadian-born extremists.” Concordia University, September 9, 2020. 6 Terrorism Risk Insurance Program Reauthorization Act of 2015. 14 U.S.C. § 6701, 2015. 7 Shenoy, Rupa. “U.S. Treasury: Boston Marathon Bombing Not ‘Act Of Terrorism.” GBH 89.7 Boston. WGBH, September 11, 2014. 8 U.S. Government Accountability Office. “Terrorism Risk Insurance: Market Is Stable but Treasury Could Strengthen Communications about Its Processes.” Publication No. GAO-20-364, April 2020. 9 Stephenson, Cassandra. “Nashville bombing: Ten buildings deemed unsafe for use or occupancy.” The Tennessean, January 1, 2021. Updated January 5, 2021. 10 Palazzo, Julia. “Damage to Nashville restaurant could cost $1 million, take a year to rebuild.” ABC2 Nashville. WKRN, December 29, 2020. 11 Porterfield, Carlie. “Terrorism Deaths Decline Worldwide, But Far-Right Attacks Are On The Rise.” Forbes, November 25, 2020.