Orlando, San Bernardino reflect changing face of terror risk, nuances in coverage

Insurance agents can expect an increase in inquiries following the attacks, but the proliferation of “lone wolf”-style terror raises a number of questions on which coverage is best

Insurance News

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A proliferation in “lone wolf”-style terrorist attacks like the Orlando, Florida nightclub shooting earlier this month has more businesses than ever before turning to insurance professionals for protection. Both carriers and agents have been fielding a rising number of requests, and the low chance that a lone-wolf attack will be detected has security firms looking more closely at solutions.

The changing face of terrorism risk, however, means agents and brokers have several choices of coverage to put before commercial clients.

In Orlando, 29-year-old Omar Mateen killed 49 people and wounded 53 others in a shooting at Pulse, a gay nightclub, before he was killed by police. During the attack, Mateen called 911 and pledged allegiance to the Islamic State terrorist group. He had also spoken against homosexuality previously, Mateen’s relatives said.

Syed Rizwan Farook and Tashfeen Malike, the perpetrators in the 2015 San Bernardino attack, were likewise unsupported by any larger group, but did express commitment to jihadism and martyrdom before going on a shooting spree and attempted bombing in a San Bernardino County Department of Public Health training event and Christmas party.

Both events involved a lone, or small number, of perpetrators acting on an ideological basis without the backing of a particular group, terrorist cell, or network.

The events have fueled an increased interest in standalone terrorism coverage, particularly among small businesses, said Jen Rubin, head of Hiscox War, Terrorism & Political Violence Practice Group.

“We’ve gotten a lot of inquiries since Orlando, with folks wanting to know what’s available in the market, what pricing looks like and what limits look like,” Rubin said. “Most of that is coming from the smaller side of the market – those who are largely new to standalone coverage and may not be big enough to have their own security procedures in place.”

Unlike government-backed terrorism insurance, which includes a $120 million loss threshold, standalone coverage pays at the first dollar lost and operates on a much broader definition of insurance. Standard industry policies define terrorism as an attack that is politically, religiously or ideologically motivated – a determination that is made after claims departments review details of the case, news media reports and other evidence.

Something like the Orlando shooting likely qualify under this definition, Rubin said.

Standalone terrorism coverage pays for property loss, including repair and replacement, as well as business income and any relocation expenses needed. Businesses can also purchase endorsements for nuclear, radiological, chemical or biological attacks, which are typically not covered under the policy.

But the San Bernardino and Orlando incidents had something else in common – they were both committed using firearms.

Gun violence in the United States has become so prevalent that several insurance companies, including major brands like Willis, have begun offering “active shooter” insurance. The policies provide coverage outside of workers’ compensation policies, including the liability companies have if they are found not to have taken needed precautions to prevent gun rampages.

It also covers “on the scene” costs of an attack, including property damage and any needed counseling or consulting for victims.

Wendy Peters, an executive vice president at Willis, said that like terrorism insurance, “there’s been widespread interest in the product.”

So which coverage choice is preferable – if either?  
                                  
Rubin says it is up to an agent to determine, based on the particularities of the client.

“When you’re doing your review of coverages, it’s really important to make sure perils are defined and any gray areas you’re concerned about are documented or discussed,” she said. “A traditional policy is silent on what would happen in an active shooter event; new products are defining what is covered based on the evolution of events in the market."


Related Stories: 
San Bernardino, other mass shootings prompt “active shooter” coverage
Orlando mass shooting sparks interest in terrorism insurance
 

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