What Is Terrorism?

In renewal of TRIA, insurance industry is asking for clarity on what constitutes a terrorist event.

Besides renewal of the current Terrorism Risk Insurance Program Reauthorization Act (TRIPRA), the insurance industry is asking Congress to expand and clarify the law to fill gaps in certification and coverage areas.

Duncan Ellis, Marsh’s property practice leader, said yesterday in an interview during a Washington appearance that the fact that the Obama administration has been silent, despite industry prodding, in saying whether the Boston bombing last year was a terrorist event points out a primary industry concern about the current law. Philip Edmundson, co-founder of William Gallagher Associates, a Boston national brokerage firm, said in an interview with PC360, “It has been a year since the event, and yet the administration has not clarified whether the Boston bombing was a certifiable event.” Under the law, the Secretary of State, the Secretary of the Treasury, and the Attorney General must jointly make such a determination.

Edmundson said that as a result of the Boston bombing, he has “seen a continued increase in the number of small and medium-sized businesses that are purchasing terrorism risk insurance. They are now joining larger organizations in buying terrorism risk insurance.” He noted the original Terrorism Risk Insurance Act (TRIA) was enacted in late 2002 at urging of large commercial properties. “Now,” he said, “it seems concern about terrorism risk has spread, and that is an important change—more and more business rely upon the federal terrorism backstop for the security of their businesses.”

Marsh’s Ellis, who spoke to PC360 after a roundtable discussion at the Visitor’s Center of the U.S. Capitol, said that so far property and casualty insurers have paid out $23 million in health care cost claims stemming from the Boston bombing and $2.5 million in property claims. But, he said, the bombing highlighted some concerns the industry has with the current TRIPRA. Aside from the certification process, he said, the industry questions whether nuclear, biological, chemical, and radiation events are covered under TRIPRA, and whether cyber attacks can be certified as terrorism events.

“We want Congress to include language in legislation reauthorizing TRIPRA that clearly delineates the whole protocol for certification,” Ellis said. Specifically, “we want a 90-day period established for such a determination.”

Massachusetts Insurance Commissioner Joseph G. Murphy said at a Property Casualty Insurers Association of America (PCI) meeting last October in Boston that the fact many businesses did not have terrorism coverage in place would have led to them being adversely affected by the April 15 bombings. Murphy said businesses and public figures took the “unusual” position that no terrorist act took place in order to “preclude carriers from triggering exclusions contained in most business insurance policies.” Murphy said officials had no experience and the closure of the sites for more than a week after the bombings made it “difficult to determine exposure or file claims.”

Murphy said the lack of clarity on whether the event would be officially declared a terrorist attack under TRIA caused some confusion in the media and among government officials. Murphy said his office submitted data from insurers to the Federal Insurance Office, but the bombings did not reach thresholds for damages under the act, he said.

Originally published on PropertyCasualty360. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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