A few years ago the word “terrorism” generally meant a large-scale attack, similar to the 9/11 attacks in 2001, or the London Transport bombings in 2005. In Trinidad, this has meant the 1990 Coup 'six days of terror' attack.
The acts were generally carried out by members of radical organizations, aimed at achieving an ideological, religious or political goal. More recently, the nature of the attacks has changed, with “lone wolves” or small groups choosing softer targets such as movie theaters, malls, night clubs or public parties/concerts to make a statement of some kind.
Despite high cost in lives and suffering, these attacks typically cause minimal direct damage to property, but can bring large indirect costs through business interruption, notes Marsh. For many organizations, the changing pattern of terrorism risk has them examining their insurance coverage to determine whether they’re adequately covered for business interruption and related losses. Businesses are also trying to prepare for potential losses from cyber terrorism and other events.
What coverages are businesses looking for?
Terrorism cover is excluded in most Property All Risk policies and many companies are now opting for standalone property terrorism insurance. In addition, businesses are looking for coverage enhancements that consider such issues as:
Active shooter situations and resulting consequences.
Extra expense for evacuating people due to a threat.
Contingent interruption of operations.
Loss of attraction.
Companies also are looking to mitigate risk from instances of nonphysical damage and situations involving active assailants or shooters, terrorism liability, damage resulting from a cyber event and nuclear, biological, chemical, and radiological risks. Insurers are structuring the policies as endorsements to standalone property terrorism insurance policies or as separate policies.
In addition, companies are asking for political violence insurance. Standalone 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, the report explains. Political violence insurance provides coverage related to war, civil war, rebellion, insurrection, coups d’état and other civil disturbances.
Take-up rates and cost?
There are significant industry variations, depending partly on whether the specific industry faces exposures in central business districts and major metropolitan areas that are perceived as being at higher risk for terrorism. Some statistics:
Media companies purchased property terrorism insurance at a higher rate (79%) than did those in any other industry segment in 2015.
Education, hospitality and gaming, and health care organizations had the next highest take-up rates among the 17 industry segments surveyed, all at or above 70%.
Manufacturing, chemicals, and energy and mining were among the industry segments with the lowest take-up rates.
In USA, it is found that there are regional differences in take-up rates. A higher percentage of companies in the Northeast (72%) purchased property terrorism insurance than in any other region, which the report attributes to the concentration of large metropolitan areas, including Washington, D.C., and New York City; the perception that major cities may be at a higher risk of a terrorist attack; population density; and that the region was the site of the 2001 terrorist attacks. The Midwest and South saw the lowest take-up rates in 2015, at 57% and 54%, respectively.
As the number of terror attacks hitting nongovernment targets, such as theatres, malls, and newspaper offices grows, employers are increasingly concerned about protecting their employees, and Workers’ Compensation insurance is a major component of that protection. Large employee concentration exposures and the associated loss potential remain key factors in workers’ compensation underwriting and pricing for terrorism risk.
Terrorism insurance is typically offered from Lloyd's of London insurers, and the rating/pricing is based on the property sum insured and business interruption values. Visit http://www.bellistt.com/#!products/zv3wk for more info.