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The Terrorism Coverage Gap: Is your business protected?

James Dover - Senior Vice President, War & Terrorism

Terrorism has a face.  The recent 2nd anniversary of the Boston Marathon attack in April of 2013, reminds us of the consequences and impact that terrorism can have on individuals and businesses when terrorist attacks target and harm the innocent.  Many businesses in Boston suffered uninsured losses from business interruption and extra expenses because their claims were not covered under the government Terrorism Risk Insurance Act (TRIA).  

The Boston Bombing tragedy was not declared a TRIA “certified” event, as the event did not exceed the government-mandated $5 million threshold.  Recent terrorist acts in Boston, Toronto, Sydney and Paris demonstrate that the likelihood of lone wolf attacks is ever increasing.  These smaller scale terrorist attacks often target populated areas and trigger losses in the single millions of dollars and therefore fall below the TRIA definition of a certified terror event. This effectively passes the cost of property damage, extra expenses as a result of a terrorist attack and business interruption, back to businesses as an uninsured gap in cover.  The question that companies and brokers should be asking is…what terrorism coverage will respond to my losses and provide certainty of protection?

In today’s uncertain world, terrorism insurance coverage has become an essential risk management strategy.  General property and liability programs often have terrorism exclusions, leaving most commercial entities with the choice to either acquire private stand-alone terrorism coverage; or if U.S. based, via the U.S. government’s TRIA facility as an add-on endorsement.  Open source data suggests a large percentage of US businesses purchase terrorism insurance and recently there has been a substantial increase in the purchase of terrorism insurance that is underwritten by the private sector on a stand-alone basis. 

To avoid any coverage risk, stand-alone policies clearly define acts of terrorism and sabotage and are responsive to insured claims even if government decision makers do not certify a TRIA event for insurance purposes.  There has never been a certified TRIA event in the U.S. since legislation was first enacted in 2002.  Today, a business may not be the target of a terrorist plot but can suffer significant loss due to unintended consequences.  Terrorism insurance is a corporate necessity and there are coverage options.  Can you rely upon your insurance plan to protect your business interests?

James Dover, Senior Vice President
Terrorism & Sabotage
Ironshore Insurance