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Is Terrorism Risk Insurance Coverage Necessary?


Terrorism has become common place amongst a lot of countries across the world. Recently, there has been a rise in the frequency of terrorist attacks both locally and internationally. These attacks have brought to the fore the realization that no facet of life is without its risk.
 
There is genuine concern over the risk terrorism posses, even though information and comprehension of terrorism risk insurance is a rather vague concept. In the latest report released by RIMS which is a not for profit organization titled; Terrorism Insurance: Understanding the Boundaries of Coverage for a Risk without Borders, it makes an attempt to expand on the concept of terrorism insurance.
 
Guidance for risk managers
The report provides guidance for determining the necessity of terrorism risk insurance for risk managers, and insurance brokers. It also goes further to identify terrorism risk solutions in existence and providing insights on negotiating terms for terrorism coverage.
 
Micah Skidmore of Haynes and Boone LLP stated in the report that proactive measures needed to be taken by corporate risk managers and counsel to contain the limitless risk associated with terrorism.
 
Is terrorism risk insurance coverage necessary?
The relationship between terrorism risk and a myriad of constantly changing factors is a means that can be used to quantify and understand its importance. From past experiences it has been observed that the risk posed by domestic terrorism is considerably higher than that of bodily harm and any other small incidence.
 
Terror attacks usually occur during the spring and summer months, which implies that these attacks are seasonal. It can be deduced from the report that the likely hood of terror attacks is higher in the Northeastern region than in the costal states of America.
 
If you are one of those looking to minimize your company’s exposure you should look beyond property damage and bodily injury by exploring other options like;
  • Fiduciary liability for corporate directors and officers,
  • Pollution loss and liability,
  • Professional (E&O) liability,
  • Employment practices liability,
  • Business interruption loss, and
  • Privacy and network security liability.
Even in situations whereby a company on its own does not recognize the risk posed my terrorism is enough to justify the need for insurance, some sort of terrorism coverage may be necessary.
 
What insurance solutions are available to address terrorism risk?
A large market pool exists for domestic terrorism risk coverage in two categories:
  • The traditional first and third party policies
  • Standalone terrorism risk insurance.
Examples of traditional policies include; commercial general liability and property policies. These may provide some terrorism risk coverage if it wasn’t categorically excluded. Another traditional policy that readily comes to mind is the Worker’s compensation insurance. This is different from other property and casualty policies as it doesn’t have exclusions.
 
On the other hand, stand-alone terrorism policies offer a wide variety of terms, although the coverage may differ. They also usually exclude political risks as well as loss as a result of strikes, riots, war and so on. Cyber Terrorism and other related acts are also excluded.