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Is Terrorism Coverage Adequate?

While governments in the United States, the United Kingdom and Europe have worked to improve terrorism insurance coverage availability and affordability since the Sept. 11, 2001 attacks, more needs to be done, a U.K. consulting firm contends.

In the wake of the recent Madrid train station bombing, governments still “need to examine carefully whether existing insurance arrangements can cope with the rising risk of man-made catastrophe,” warned Oxford Analytica, based in Oxford, England.

Although the United Kingdom, Spain, France, Germany and the United States have adopted various schemes to provide for terrorism coverage, Analytica said policymakers still need to “reassess the adequacy of existing insurance arrangements to withstand the shock from terrorist attacks.”

Analytica noted that in the United States, the private insurance industry remains largely responsible for losses under the threshold level supported by the Terrorism Risk Insurance Act.

Although TRIA requires that terrorism coverage be offered on all primary policies through 2004, insureds themselves elect whether to pay for this option, and only 25 percent have done so, Analytica reported. Congress must decide later this year whether to extend TRIA.

In general, reinsurers operating in the United States have excluded terrorism from general catastrophe policies, although some offer limited separate stand-alone policies, Analytica reported.

Reproduced from National Underwriter Edition, April 16, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.