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Understanding Terrorism Insurance for Your Business

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The Terrorism Risk Insurance Act

In 2002, President George W. Bush signed the Terrorism Risk Insurance Act (TRIA) into law. What is the Terrorism Risk Insurance Act? According to the U.S. Department of the Treasury, “The TRIA created a temporary federal program that provides for a transparent system of shared public and private compensation for certain insured losses resulting from a certified act of terrorism.” In 2019, the Terrorism Risk Insurance Program Reauthorization Act of 2019 extended the program through December 31st, 2027. 

What this law does is provide reinsurance coverage to insurance companies in the event of any event which is declared terrorism. Prior to the attacks on 9/11, commercial insurers did not exclude acts of terrorism. But the estimated $40 billion loss triggered the realization that there was a need for such coverage.

The losses from those attacks were largely borne by reinsurers who were hit so hard that they left the terrorism market. Once there was no available reinsurance, primary insurers began excluding terrorism incidents, causing a vacuum in the industry, which Congress fixed by enacting TRIA.

What is an Act of Terrorism?

According to the FBI, domestic terrorism is “Violent, criminal acts committed by individuals and/or groups to further ideological goals stemming from domestic influences, such as those of a political, religious, social, racial, or environmental nature.”

The U.S. Department of the Treasury defines an Act of Terrorism as: 

  • A violent that is dangerous to human life, property, or infrastructure
  • Results in damage within the United States, to an air carrier, United States flagged vessel, or the premises of a United States mission
  • Have been committed by individual(s) as part of an effort to coerce the civilian population of the United States or to influence

What is Covered by Terrorsim Insurance?

Terrorism insurance provides coverage similar to that of commercial property insurance. This includes losses from destroyed property such as building repair and replacing equipment, furniture, and inventory. 

It can also provide business interruption insurance coverage if you’re unable to operate due to property damage. 

What is Excluded from Terrorism Insurance Coverage? 

Acts committed as part of the course of a war are not covered. Nuclear, biological, chemical, or radiological warfare are often excluded from coverage, depending on the stare your business operates in. If your small business is concerned about cyber terrorist attacks, you may want to consider cyber liability insurance (as it is often not covered under a terorrism policy). 

In order for an act of terroism to be covered by insurance under the TRIA, aggregate property and casualty losses must exceed $200 million (as of 2020). Qualifying whether or not the damage is enough to constitute an act of terror is complicated, which is why it’s best to speak with a knowledgeable agent about whether or not your small business would need coverage. 

Who Needs Terrorism Insurance? 

Most small business owners believe they are not at risk of terrorist attack. Yet many businesses suffered a major loss even though they were miles from The World Trade Center on 9/11. Unfortunately, terrorist threats are increasing. The vast damage from a terrorist attack can devastate a business. Your small business may no longer be able to operate because of property damage. Here are some things you should consider:

  • Does your business operate in a commercial area or urban center? What about in an airport or train station?
  • Is the cost prohibitive ($15 to $49 per million insured)?
  • Is your business part of a high-risk industry? 

Get a Free Terrorism Insurance Quote

If you believe your business is in an area or industry that is at-risk of a terrorist attack, speak to one of our agents to help you determine the coverage that’s necessary to protect your business. You can complete the form at the top of the page, or call us at 1-877-907-5267.

 

Related Articles: Commercial Property Insurance, Business Owners Policy, Business Interruption Insurance

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