Prior to the September 11, 2001 attack on the World Trade Center towers and the Pentagon, terrorism coverage was a standard component of most insurance policies. The financial toll of 9/11 caused coverage costs to skyrocket, and many insurance companies stopped offering it completely.
Terrorism is an unfortunate reality that can impact anyone without warning. As insurance is all about preparing for the unexpected, it is important to understand the Terrorism Coverage options available to offer your investor clients.
What is TRIA?
The Terrorism Risk Insurance Act (TRIA) is a United States program enacted following the 9/11 attacks. It creates an insurance offering and provides compensation for certain insured losses resulting from certified acts of terrorism. For TRIA to be “triggered” and claims to be paid out, the following must happen:
- The Secretary of Treasury must certify that the act caused more than $5,000,000 of damage
- The Secretary of Treasury must meet with the Secretary of Homeland Security and certify the attack as an Act of Terrorism
Unfortunately, this program is not very consistent in the decision of what qualifies as an Act of Terrorism and has yet to every pay out on any event. While the 2019 El Paso Walmart shooting was certified as an Act of Terrorism, the 2013 Boston Marathon bombings were not.
In what situations could your investor clients be left uncovered under TRIA?
Let’s say you have a client that owns and rents out a condo in one of the buildings along the route of the Boston Marathon. As a result of the bombing, the condo is damaged and rendered uninhabitable. This damage and loss of income is likely not covered under their standard property policy. Although Explosion is a covered peril under almost all policies, because an intentional bombing is part of a terrorist act, your client’s claim could be denied under the terrorism exclusion. Unfortunately, because the incident has not met the threshold for a Certified Act of Terrorism, if your client’s coverage is through TRIA, a payout is unlikely.
TRIA was designed to cover incidents like 9/11, large-scale attacks of mass destruction. In contrast to huge, well-funded foreign organizations, most acts of terrorism or political violence nowadays are small-scale, lone wolf strikes like mass shootings.
REInsurePro’s Terrorism Coverage
We offer a private terrorism option as an alternative to TRIA. In our program, an Act of Terrorism is defined as an act or series of acts, including the use of force or violence, of any person or group(s) of persons, whether acting alone or on behalf of or in connection with any organization(s), committed to political, religious, or ideological purposes including the intention to influence any government and/or to put the public in fear for such purposes.
Our coverage is a more comprehensive option, with more competitive pricing, and does not require the government to issue an Act of Terrorism. Our Terrorism Coverage is a set cost per location, as opposed to TRIA which is a percent of the property premium. Our offering is $1 per unit, per month. Additionally, once necessary policy triggers are met, our coverage pays out almost immediately. This coverage is automatically included on all eligible properties but can be removed if explicitly requested by your client.
Our included coverages:
- Active Assailant Event
- A malicious act involving force or violence by any person or group(s) of persons, where such person is armed with a weapon that prevents the insured from conducting its normal business operations, and which physically harms or kills two or more persons.
- For example, let’s say an active shooter has been identified at the grocery store down the street from your client’s property and is now on the run. The shooter forcibly enters your client’s property and injures or restrains the tenants. Any property damage caused during this event could be a covered loss under Active Assailant Event.
- Act of Terrorism
- A forceful or violent act or series of acts committed by any person or group(s) of persons for political, religious, or ideological purposes and with the intent to influence any government and/or to put the public in fear.
- Act of Sabotage
- A subversive act or series of acts committed for political, religious, or ideological purposes including the intention to influence any government and/or put the public in fear for such purposes.
- Evacuation Expense
- Reasonable travel expenses to designated areas and the additional food and accommodation costs within those areas, in consequence of an evacuation of persons from a dangerous area.
- For instance, a bomb was purposely placed to target a certain group in your client’s area and the explosion resulted in damages to their property. If the damages required tenants to leave or for your client to limit access in some way, the expenses of evacuation may be covered.
- Gross Earnings
- Total net sales and other earnings derived from the operation of the insured’s business LESS the cost of goods sold.
- If a terrorism event caused property damage to the extent that the property is uninhabitable for a period of time, this aspect of our coverage could reimburse your client for loss of rental income while the property is being repaired.
Where is Terrorism Coverage available?
Coverage in the REInsurePro program is available anywhere in the United States EXCEPT for areas listed below:
- Chicago, IL
- New York City