In the wake of recent tragedies, many organizations are concerned with the possibility of a terrorist attack affecting their places of business. Online searches around terrorism risk insurance have spiked, showing that business owners are both concerned about and potentially unaware of how they can insure themselves against the possibility of a terrorist attack.
Terrorism risk insurance became a concern after Sept. 11, 2001. As a response to the tragedy, President George W. Bush enacted the Terrorism Risk Insurance Act (TRIA) to ensure that businesses would be protected in the event of another tragedy of that magnitude.
What is the Terrorism Risk Insurance Act?
On Nov. 26, 2002, the Terrorism Risk Insurance Act of 2002 was signed into law, creating an impermanent federal program that requires insurers to make terrorism risk insurance available to businesses. TRIA also provides for the sharing of losses between the federal government and the private insurance market for “certified acts of terrorism.” Currently, the insurance market picks up the risk until the losses reach $100 million, but do not exceed $100 billion. This threshold hasn’t been met since 9/11.
The program has most recently been extended until 2020, but it is unlikely to be renewed again. The private insurance market has already begun to develop alternative products to fit this need in the event TRIA is not authorized again.
Terrorism coverage is offered separately or as an “endorsement” to a property insurance policy. It is important to note a standard property insurance policy alone will not cover losses caused by terrorism.
Who Needs Terrorism Risk Insurance
The most obvious need for terrorism risk insurance is for property and construction in densely populated areas, particularly in busy cities with skyscrapers. After all, TRIA was created in response to the extreme losses incurred by businesses in the densely populated Financial District in New York City and the iconic Pentagon building in Arlington, Va.
Also at risk is anyone who owns property that could be a direct target of a terrorist attack, like the World Trade Center and Pentagon were. Buildings in high-profile cities and even national historic landmarks have heightened exposure. Lastly, regardless of their location, terrorism coverage is usually required by banks and other financial institutions that provide mortgages on properties.
How Do I Get Terrorism Risk Insurance for My Business?
Work with your insurance broker to determine the best coverage for your property. With the potential for the renewal of TRIA up in the air and the emergence of new products in the market, the best solution for your business may be a private alternative to TRIA’s coverage.
The products beginning to emerge in the market are likely to be broader than what is currently offered by the government to include acts of sabotage, civil commotion, strikes, and riots in their coverage. While many businesses are at risk for being affected by a terrorist attack, many more stand to benefit from the potentially broader scope of private insurance products’ coverage. Be sure to consult with your broker to determine the best coverage for your business’s needs.
Philadelphia, PA, 19102