Terrorism Insurance for Commercial Buildings

Posted on 17 September, 2012 by Jodee Redmond

The cost of the attacks on September 11, 2001, cost Americans deeply, not only in human terms, but also a blow to feelings of personal security. Insurers paid out $32.5 billion in claims related to events which took place this day, which made it the most expensive catastrophe the U.S. had ever experienced.

Commercial property owners need to prepare for the threat of terrorism in the same way they protect their investment against other threats. Terrorism insurance provides coverage to businesses as well as individuals for losses due to acts of terrorism.

Before the 9/11 terrorist attacks, this type of overage was included in a standard commercial insurance policy. The insured received this type of protection at no extra charge. Now, it is available as separate cover at a cost which more adequately reflects the risk associated with providing it.

Insurance coverage is provided by private insurance companies and reinsured by the federal government under the Terrorism Risk and Insurance Act of 2002 (TRIA). The Act has been renewed twice, and the current law will remain in effect until December 2014. Under this program, commercial building owners must be offered terrorism insurance coverage.

For an act to be covered under TRIA, it must be deemed a “certified act” by the Secretary of the Treasury. Under the partnership, private insurance companies and the federal government share the risk of terrorism claims.

  • For an event to meet the threshold to be certified, it must cause at least $100 million in aggregate property and casualty losses.
  • An act of terrorism includes domestic and foreign events.
  • Paying out a certain amount in claims is responsible of each insurance company. But the federal government will provide any assistance. This amount represents the insurance company’s deductible under the arrangement.
  • The federal government is responsible for paying out 85 per cent of losses over an insurance company’s deductible. The insurance company pays the remaining 15 per cent.
  • The amount for losses covered by the program is capped at $100 billion.



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