On the evening of July 14, a lone driver in a 19-tonne truck deliberately drove into crowds celebrating Bastille Day in Nice, France. What would ultimately become one of the deadliest mass killings in French history left 85 people dead and 307 injured, as the world decried the act as one of terrorism and hate.
The actions of the driver, Mohamed Lahouaiej-Bouhlel, did not happen in a vacuum, however. Just a month earlier, gunman Omar Mateen shot and killed 49 people in a similar hate crime at Pulse, a gay nightclub in Orlando, Florida. And in December 2015, Syed Rizwan Farook and Tashfeen Malike went on a shooting spree and attempted bombing at a San Bernardino County Department of Public Health training event and Christmas party.
Learn more about terrorism insurance products here.
Yet despite being labeled in the press as acts of terror, these three events have one thing in common – they were committed by people who had no direct support from a known terrorist group, and the negligible property damage caused came nowhere near triggering a federal determination of terrorism.
This style of ‘lone wolf’ attack, in which a small number of unconnected parties commit ideologically driven crimes without direction from a larger group, is growing in influence. As insurers prepare to meet these challenges – particularly in the wake of a US CIA report anticipating a heightened threat from groups pledging allegiance to the Islamic State this summer – they need to be aware of the strengths and differences among a bevy of new products on the market.
The most obvious applicable coverage is standalone terrorism, and the market has been flooded with inquiries following recent events, says Jen Rubin, head of the
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 says. “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.”
Standalone coverage pays at the first dollar lost and operates on a rather broad definition of terrorism. Standard industry policies define it as an attack that is politically, religiously or ideologically motivated – a determination made after claims departments review details of the case, media reports and other evidence.
The attacks in Nice and Orlando likely qualify under this definition, Rubin says.
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 Nice, San Bernardino and Orlando incidents had something else in common: they were all committed without causing significant damage to property. The harsh new reality in global terrorism is that incidents involving one active assailant occur often and claim many lives. And that can lead to coverage gaps for businesses of all sizes, says Ben Tucker, head of Terrorism & Political Violence at XL Catlin.
“Much of the industry’s rating on terrorism risk has been based on events like 9/11, which are very catastrophic and have a lot of property damage, but that’s not what we’re seeing now,” he says. The focus on physical damage and general liability often seen in standalone terrorism policies, then, means the products typically “don’t help clients respond immediately” following an attack.
XL Catlin has tried to fill that void with its new Active Assailant policy. The product, which has driven much of the company’s recent increase in submissions, offers time element coverage due to bodily injury or death, not just physical damage. It can be triggered when an event involving a handheld weapon (such as a gun or suicide bomb vest) affects three or more people – and the definition of ‘affects’ is broad.
A person could simply be a witness.
That has made the product appealing to businesses of all sizes, including smaller companies that would otherwise miss TRIA triggers or suffer from losses caused by a high-fatality attack that did not involve significant physical damage or generate legal action.
“I think the level of awareness is increasing quite dramatically, and it’s not limited to large risk management type of exposures,” Tucker says. “It’s really about responding to the time element rather than waiting to be sued or having your property destroyed.”
The interest in diverse terrorism coverage is so great that XL Catlin is fielding calls from independent agents and wholesalers representing school districts, public buildings or small hospitality accounts. Recent events have them concerned about their clients’ coverage, and Tucker offers this advice: “What tends to happen on the smaller business side is that companies will buy their property and GL coverage as a package, and may or may not take up TRIA as a part of that. But they don’t really appreciate that $5 million trigger,” he said. “You really need to put the coverage into silos, a bit.”
