Terrorism insurance

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Part of a series on

Terrorism

* Definitions
* History
* Incidents

By ideology

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Organizational structures

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* Methods
* Tactics

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Terrorist groups

* Designated terrorist groups
* Charities accused of ties to terrorism

Relationship to states

* Violent non-state actors
* Islamic State

State terrorism

* Kazakhstan
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State-sponsored terrorism

* Iran
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* Russia (Soviet Union)
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* United States
* Venezuela

Response to terrorism

* Counterterrorism
* Anti-terrorism legislation
* Terrorism insurance
* War on terror

* v
* t
* e

Terrorism insurance is insurance purchased by property owners to cover their potential losses and liabilities that might occur due to terrorist activities.[not verified in body]

It is considered to be a difficult product for insurance companies, as the odds of terrorist attacks are very difficult to predict and the potential liability enormous.[not verified in body] For example, the September 11, 2001 attacks resulted in an estimated $31.7 billion loss.[citation needed] This combination of uncertainty and potentially huge losses makes the setting of premiums a difficult matter. Most insurance companies therefore exclude terrorism from coverage in casualty and property insurance, or else require endorsements to provide coverage.[not verified in body]

## Industry needs

[edit]

Concentration of risk is another factor in determining availability for terrorism insurance. Due to the concentrated losses of the World Trade Center, carriers were hit with large losses in one centralized location. Insurers seek to spread the coverage over a wider geographic area than as with other aggregate perils, such as flood.

## Modelling the risks

[edit]

Insurance companies are using an approach that is similar to that used with natural catastrophe risks. A Swiss report[citation needed] suggested that in this case where demand is greater than the supply for terrorism coverage that a short-term solution is possible: a mix of government and private resource to make easy the transition. In this situation, the government would serve two functions: to establish rules to overcome the capacity shortage and to be the insurer of last resort.

## By country

[edit]

### France

[edit]

In France, a pool of insurers and reinsurers was set up on 1 January 2002 under the name Gestion de l'Assurance et de la RÉassurance des risques attentats et Actes de Terrorisme (GAREAT). GAREAT is constituted upon the principle of mutuality between its Members, all of whom are jointly liable, and relies on the support given to GAREAT by international reinsurers as well as by the French State which provides unlimited coverage to the GAREAT programme via unlimited treaties reinsured 100% by Caisse Centrale de Réassurance (CCR) [fr]. As a non-profit-making Economic Interest Grouping mandated by its Members, GAREAT returns to the latter that part of the premiums which are not used to finance the reinsurance coverage at the close of each year.[1][citation needed]

### Germany

[edit]

The Extremus Versicherung, founded in 2002, is a private company that insures terrorism risks in Germany. While the first 2.5 billion € in damages are covered by the insurance, the German government guarantees a further 6.5 billion € in insurance pay-outs.

### Netherlands

[edit]

Insurance payments related to terrorism are restricted to a billion euro per year for all insurance companies together[citation needed]. This regards property insurance, but also life insurance, medical insurance, etc.

### Iraq

[edit]

The New York Times reports that in Baghdad personal terrorism insurance is available. One company offers such insurance for $90, and if the customer is a victim of terrorism in the next year, it pays the heirs $3,500.[2]

### United States

[edit]

In 2002, the US Congress enacted the Terrorism Risk Insurance Act, in which the government shared the cost of large insurance losses.[3]

On December 26, 2007, the President of the United States signed into law the Terrorism Risk Insurance Program Reauthorization Act of 2007 which extends the Terrorism Risk Insurance Act (TRIA) through December 31, 2014. The law extends the temporary federal Program that provides for a transparent system of shared public and private compensation for insured losses resulting from acts of terrorism.[4]

Some economists have supported U.S. government subsidies of terrorism insurance. Soon after the 9/11 terrorist attacks, economist Edwin Mills expressed concern over whether private developers could build real estate without subsidies for insurance.[5] Economist David R. Barker argued that properly structured subsidies could increase overall economic efficiency.[6] Other economists have argued against these subsidies.[7][8]

The United States insurance market offers coverage to the majority of large companies which ask for it in their policies.[9] The price of the policy depends on where the clients are residing and how much limit they buy.

Attack on the World Trade Center

According to The Economist[citation needed], one of the best studies to understand TRIA has been the one undertaken in 2005 by the Center for Risk Management at the Wharton Business School ("TRIA and Beyond"; available on their website below).

In mid-2007 the idea of another extension to TRIA was tabled and is officially known as TRIREA[citation needed], (Terrorism Risk Insurance Revision and Extension Act). Initially TRIREA contained several new provisions including a mandatory 'make available' clause for NCBR coverage (Nuclear, Chemical, Biological and Radiological) and the ending of the distinction between domestic and foreign events.

The act expired on December 31, 2014, but was renewed at the start of the next congress, with Obama signing the extension of the TIRA through 2020 on January 12, 2015.[10] Up until the 2014 expiration, many experts warned that "construction projects could be stalled and commercial loans on shopping malls, utilities and skyscrapers could be in jeopardy." In addition, according to The Baltimore Sun, the National Football League denied rumors that it would cancel the Super Bowl over the issue.[3]

### United Kingdom

[edit]

In the UK, following the Baltic Exchange bomb in 1992, all UK insurers stopped including terrorism coverage on their commercial insurance policies with effect from 1 January 1993 (home insurance policies were unaffected). As a consequence, the government and insurance industry established the Pool Reinsurance Company Ltd (Pool Re). Primarily funded by premiums paid by policyholders, the government guarantees the fund although any such support must be repaid from future premiums. To date, despite paying over £600 million in relation to thirteen separate claims, no government support has been necessary.[11]

## Countries with long-term terrorism insurance programmes

[edit]

According to the policy agenda of The Real Estate Roundtable, long-term terrorism insurance is available in the following countries:

1. Australia
2. Austria
3. Finland
4. France
5. Germany
6. Israel
7. Namibia
8. Netherlands
9. Russia
10. South Africa
11. Spain
12. Switzerland
13. Turkey
14. United Kingdom
15. India

## See also

[edit]

* Security
* Geneva Association (also known as the International Association for the Study of Insurance Economics)
* Pool Re

## References

[edit]

1. ^ "Who are we?". GAREAT. Archived from the original on 16 February 2017. Retrieved 16 February 2017.
2. ^ Worth, Robert F. (21 March 2006). "New Business Blooms in Iraq: Terror Insurance". The New York Times. Archived from the original on 12 February 2015. Retrieved 12 February 2015.
3. ^ a b "Expiring terrorism insurance program alarms Md. industries". Baltimore Sun. Archived from the original on 31 December 2014. Retrieved 28 December 2014.
4. ^ U.S. Treasury - Office of Domestic Finance - Terrorism Risk Insurance Program Archived 2007-11-14 at the Wayback Machine
5. ^ Edwin Mills, Terrorism and US real estate, Journal of Urban Economics 51 (2002) 198–204.
6. ^ David Barker, Terrorism insurance subsidies and social welfare, Journal of Urban Economics 54 (2003) 328–338
7. ^ "The Terrorism Risk Insurance Act: Time to End the Corporate Welfare" (PDF). Cato Institute. Archived (PDF) from the original on 30 December 2013. Retrieved 27 April 2014.
8. ^ Dwight Jaffee and Thomas Russell, Public Insurance and Private Markets, 2010, pp. 86-114, Washington, D.C.: AEI Press; distributed by Rowman and Littlefield, Lanham, Md.
9. ^ "Property Casualty Insurers Association of America". Archived from the original on 9 September 2012. Retrieved 12 February 2015.
10. ^ "TRIA reauthorized with several tweaks". 2015-01-19. Archived from the original on 2016-08-19. Retrieved 2016-07-14.
11. ^ "About the Company". Pool Reinsurance. Archived from the original on 26 February 2015. Retrieved 26 February 2015.

## External links

[edit]

* Terrorism from the Insurance Information Institute
* Policy Watch: Challenges for Terrorism Risk Insurance in the United States (Wharton's authors)
* Terrorism Insurance: Where's the coverage?
* America Needs Terrorism Insurance
* Terrorism Insurance: Where Do We Go from Here? (Wharton's authors)
* CIAT: Coalition to Insure Against Terrorism
* Wharton Risk Center on Terrorism Insurance Markets

* v
* t
* e

Insurance

Types of
insurance|

| Health|

* Accident
* Accidental death and dismemberment
* Dental
* Disability
* Total permanent disability
* Business overhead expense
* Income protection
* Long-term care
* National health
* Payment protection

|

Life|

* Longevity insurance
* Mortgage life
* Term life
* Unitised fund
* Universal life
* Variable universal life
* Whole life

Business|

* Bond
* Business interruption
* Business owner
* Collateral protection
* Directors and officers liability
* Fidelity
* Over-redemption
* Payment protection
* Pollution
* Professional liability
* Protection and indemnity
* Surety
* Trade credit
* Umbrella

Residential|

* Boiler
* Builder's risk
* Contents
* Earthquake
* Flood
* Home
* Landlords'
* Lenders mortgage
* Mortgage
* Property
* Renters'
* Title

Transport/
Communication|

* Aviation
* GAP insurance
* Inland marine
* Public auto
* Marine
* Satellite
* Shipping
* Travel
* Vehicle

Other|

* Reinsurance
* Catastrophe bond
* Insurance-linked securities
* Casualty
* Climate risk
* Crime
* Crop
* Catastrophic
* Multi-peril
* Cyber
* Deposit
* Expatriate
* Extended warranty
* Group
* Index-based
* Parametric
* Interest rate
* Kidnap and ransom
* Legal expenses
* Liability
* No-fault
* Pet
* Political risk
* Prize indemnity
* Takaful
* Terrorism
* Tuition
* War risk
* Weather
* Workers' compensation

Insurance
policy
and law|

* Act of God
* Actuarial science
* Actuary
* Adverse selection
* Risk
* Risk assessment
* Risk management
* Uncertainty/Knightian
* Value of life
* Actual cash value
* Cash value
* Broker
* Cancellation
* Pro rata
* Short rate table
* Claim
* Claims adjuster
* Deductible
* Co-insurance
* Copayment
* Out-of-pocket expense
* Explanation of benefits
* Force majeure
* General average
* Indemnity
* Insurability
* Insurable interest
* Insurance fraud
* Proximate cause
* Replacement value
* Risk pool
* Self-insurance
* Total loss
* Underinsurance
* Underwriting
* Profit

Insurance
by country|

* Australia
* China
* India
* Pakistan
* Serbia
* United Kingdom
* United States
* Climate change
* Health insurance
* Health insurance costs
* Health insurance coverage
* Vehicle insurance

History|

* Mesopotamian banker
* Code of Hammurabi
* §100–105; §126; §234; §235–238; §240; §275–277
* Collegium
* Burial society
* Guild
* Corpus Juris Civilis
* Digesta
* Syndicate
* Benefit/Friendly society
* Cooperative
* Cooperative banking
* Credit union
* Fraternal order
* Mutual organization
* Mutual savings bank
* Rochdale Principles
* Savings and loan association
* Social insurance
* Trade union
* Insurance cycle

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