Time for government to protect this coverage?

It’s a question coming from Canadian brokers as fear about escalating terror attacks expose how vulnerable clients are to insurer flight

Risk Management News

By

Vernon Clement Jones

Canada is without the public-private terrorism insurance that many “at-risk” nations have adopted – raising concerns about a possible loss of coverage if local insurers pull the plug.

“The fact that the recent Paris attacks were perpetrated against 'soft' targets may or may not figure in to the appetite for insurers in Canada to underwrite terrorism risk coverage,” writes Carol Lyons, co-chair of MacMillan LLP’s insurance regulatory unit. “If availability of appropriate coverage for a reasonable price is materially affected, there may be renewed interest in a terrorist risk insurance scheme in Canada.”

That remains, at least for now, hypothetical. Terrorism risk coverage is widely available in Canada through a number of “large, sophisticated brokerages,” points out Lyons. Export Canada also actively markets the product to the growing number of companies sending their wares offshore.

Still, President Obama’s recent decision to call the San Bernadino mass shooting a “terrorism attack” has rattled some insurers Stateside. If enough of their counterparts north of the border show that reticence, the stream of terrorism coverage could draw to a trickle.

Lyons is among the first to lay out the case for some form of government backstop on terror coverage. Ostensibly, it’s one way of preventing exporters from retreating to domestic markets. At the same time, it would allay growing fears among all commercial clients about their infrastructure – to say nothing of their staff and customers.

Brokers have expressed interest in Canada following the US in protecting the availability of private terrorism coverage.

Under the Terrorism Risk Insurance Act (TRIA), American business, big and small, can win coverage for specific losses occurring as a result of a certified "act of terror." That program, introduced in the aftermath of 9/11 was just renewed till the end of 2020.

Keep up with the latest news and events

Join our mailing list, it’s free!