Terrorism Insurance

Before the 9/11 attacks, insurers didn’t charge for terrorism insurance, but now reinsurers believe they cannot price the risk. The Terrorism Risk Insurance Act (TRIA), enacted a year after the 9/11 attacks, makes the Federal Government the backstop for private insurance companies in the event of such catastrophes. A terrorist act that is eligible for coverage under TRIA must be certified by the Secretary of the Treasury.

Since TRIA’s passage, the private industry’s willingness and ability to cover terrorism risk have increased. According to industry surveys, prices for terrorism coverage have generally trended downward, and approximately 60% of commercial policyholders have purchased coverage over the past few years.

Each time a business renews its commercial insurance policy, terrorism coverage is offered. Policyholders have the option to elect the coverage or decline the coverage. (Workers Compensation policies automatically include terrorism; you can’t opt out of it!) Prior to the April 15, 2013 Boston Marathon bombings only about 50% of Mike Regan’s commercial property clients actually purchased terrorism insurance. Whether or not the bombings are deemed a “terrorist” act could have enormous financial implications for the businesses that suffered damages or closed during the police investigation.

It may seem obvious to many that the bombing was an act of terrorism, but whether it is certified as such means a great deal to the property owners affected by it. Think of this; a bomb damaging your building is not an excluded peril from “Special” (used to be called All Risk) property coverage’s. You would be covered even if you didn’t purchase terrorism coverage. However, if it becomes a “certified” act of terror and you did not purchase the terrorism coverage you will not be covered! Multiple property claims from the bombing are in limbo until such time as the Secretary of the Treasury does or does not certify the event.

Mike Regan was recently quoted in a Boston Business Journal article titled “State of Exposure”. The article discussed the resurgence of terrorism coverage in the wake of the Boston Marathon bombing. “It’s definitely opened people’s eyes to having it”. “After 9/11 it was a big item. But, like most things, over time people tend not to think about it the same way and then some people stopped asking what it is, what it means, whether events are covered or not. Now they’re starting to ask that again.”

At Cleary, we will evaluate your business exposures and work with you to develop a comprehensive plan to safeguard your business. Give us a call today at 617-723-0700.