Terrorism Risk: Years After 9/11 Is Your Organization More Or Less Vulnerable To Terror Threats?

Years after 9/11 threat of terrorism continues to persist. Organizations buying insurance to provide protection from terror attacks is on the rise.

Terrorism Insurance

Prior to 9/11, there was terrorism insurance was not a major concern. However, after 9/11 insurance and reinsurance companies found themselves with significant amount of exposure. Immediately following 9/11, insurance companies were refusing to provide terrorism insurance or providing it at a very high premium to high risk facilities.

For example, before 9/11 Chicago O’Hare airport had $750-million of terrorism insurance coverage at an annual premium of $125,000. After 9/11, the airport was offered a $150-million of terrorism insurance coverage for an annual premium of $6.9-million!

The insurance companies were finding it difficult to insure against terror risks – uncertain, random, unquantifiable risk that can affect multiple customers at the same time.

Terrorism Risk Insurance Act (TRIA)

In order to enable insurance companies provide terrorism insurance, the government passed Terrorism Risk Insurance Act (TRIA) in 2002 and it has been extended to 2014. TRIA requires insurance companies to offer terrorism insurance to commercial enterprises. Clients have the right to refuse terrorism insurance coverage unless mandated by state law. Under the TRIA if a terrorist act produces insurance losses above $100-million, the losses are covered by federal funds.

Should Your Organization Buy Terrorism Insurance?

If you are in Bangor, Michigan I would not worry too much about terror threats. However, urban areas, financial institutes, sports stadiums, historical monuments are all attractive targets. What about refineries? Refineries are being asked to have security measures in place under the Chemical Facility Anti Terrorism Standard (CFATS).

Terrorism Trends

Unlike what movies suggest, a mega-attack comparable to 9/11 is fairly unlikely. According to me in the near future the U.S. will experience more number of smaller attacks because of

(a) shrinking terrorist “cells” and

(b) the security measures in place after 9/11. It is difficult to bring down a plane now!!