Last Friday evening, 20-year-old Arcan Cetin grabbed his rifle, drove from his hometown of Oak Harbor, Washington to the nearby town of Burlington, entered the Macy’s store in the Cascade Mall and opened fire. By Saturday morning, five people were dead.
This latest mass shooting is part of a disturbing trend in mass violence inflicted in the United States. From 2000 to 2013, the FBI measured 160 active-shooter incidents, defined as an individual or individuals “actively engaged in killing or attempting to kill people in a confined and populated area.” During the first seven years of the data set, 45 such events were recorded; that ballooned to 115 events during the last seven years.
Around the outbreak of violence, an emerging insurance market has sprung up. With new active shooter products from mainstays in Europe to homegrown programs in the US, insurance agents already have a variety of options in an area some underwriters believe will become just as vital to the average commercial account as cyber or employer professional liability coverage.
These policies are so new – most introduced just this year – that there is no “industry standard” coverage. However, most provide cover for active shooter incident services both before and after the loss. This can include liability, business interruption and coverage for counseling and crisis management services, among other features.
Interest in the products is widespread, with inquiries pouring in from across the country and among all classes of business, says Paul Marshall, program manager for McGowan Program Administrators’ new Active Shooter Division. It especially surges after incidents of mass violence hit the headlines, such as Friday’s Cascade Mall shooting.
“The Monday afterward we got a spike of agent submissions from that area and from malls in general. After an event like that, it’s just a guarantee,” Marshall told Insurance Business America
. “The response has been overwhelming; we’re writing everything from $500 in premium on daycares to very large school systems. This isn’t just one class or one area.”
Marshall believes the market response will only increase as mainline carriers begin specifically excluding active shooter and mass violence-related events from general liability policies. Some carriers have already begun to do so on specific policies, he says, instead offering nominal amounts of coverage through specialty brokers.
“It’s very like cyber or EPLI in that way,” he said. “Unfortunately, there’s no way we can stop this increase in attacks and I think we’ll see this coverage evolve to become necessary for every one of an agent’s commercial accounts.”
It could even evolve to absorb standalone terrorism coverage, as policies in both areas cover many of the same risks.
The market still needs about six months to reach full maturity, however, Marshall said. A bevy of exclusions, pricing concerns and a moving target in terms of risk now plague many in the space.
Some marketplace exclusions include a threshhold or limit on the number of victims. Others exclude employees from coverage, while still more pay out only for defense expenses, not monetary damage.
Even more are narrow in scope. McGowan’s program was originally written to cover firearm-based crimes only – a definition Marshall says is now six months old.
The extreme variability should send a strong “buyer beware” signal to retail agencies, who would do well to double-check exclusions, clearly explain coverage to their clients and get their agreement in writing.
It would also behoove agencies to appoint an “active shooter specialist” in the office, as several have done with cyber insurance, Marshall advised.
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