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December 4, 2019
Whether you have one building or an extensive schedule of properties, having a high quality insurance portfolio is key to maintaining good relations with tenants, lenders, regulators, and other stakeholders. Terrorism coverage can be an important part of that program.
Congress enacted the Terrorism Risk Insurance Act (TRIA) following Sept. 11. In 2015, it was reauthorized under the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA). Under the Act, federally backed terrorism coverage typically can be added as an extension to a specific line of insurance and covers “certified” events only.
For the event to be deemed “certified,” the following criteria must be met:
If the event meets the above criteria and coverage was already purchased, then the federal government would provide reinsurance to the insurance carrier providing the primary coverage.
As you can see, the bar for a terrorism event to be considered “certified” is high. For example, the 2013 Boston Marathon attack that killed five people and injured approximately 264 was never certified by the federal government, so government-backed terrorism coverage purchased by businesses around that event was never triggered.
The question about whether to purchase the coverage usually arises in conjunction with the property and liability insurance renewals. However, terrorism coverage can be added to a program at any time (prior to an event). In some cases, terrorism insurance can be a crucial and major component in the portfolio — particularly if the property is iconic, large, or bustling with people. Terrorist targets often focus on these kinds of properties.
In some cases, terrorism insurance can be
a crucial and major component in the portfolio—particularly if the property is iconic, large, or bustling with people.
So, is there a way to purchase terrorism insurance that isn’t subject to the federal certification process? There is. Standalone terrorism programs provide broader coverage than the federally backed programs and offer the following advantages:
In the end, terrorism insurance products (and the insurance market) have evolved dramatically since the early days following 9/11. As mentioned, while the federally backed program provides “certified” coverage, most events would never qualify under the Act and go uncovered.
New standalone terrorism insurance products do not have to adhere to those certification requirements and therefore are more favorable to buyers. The ability to trigger coverage may be the difference between financial support and a substantial recovery following an event and an uninsured loss. Today, there are numerous ways to address the threat of terrorism through proper preparation, exposure reduction (security), and the purchase of terrorism insurance to help with recovery. If you haven’t considered standalone terrorism coverage lately, talk to an experienced risk manager or insurance broker, and they can help you find the right product that meets your needs.
The views and opinions expressed within are those of the author(s) and do not necessarily reflect the official policy or position of Parker, Smith & Feek. While every effort has been taken in compiling this information to ensure that its contents are totally accurate, neither the publisher nor the author can accept liability for any inaccuracies or changed circumstances of any information herein or for the consequences of any reliance placed upon it.