Terrorism insurance

From ArticleWorld

Terrorism insurance may be defined as insurance taken out by consumers to cover the damages and costs that may accrue as a direct effect of terrorist activities.

Shaky ground

This is still a grey area in insurance circles. Terrorist activities are difficult to predict, since there is no pattern to them and the insurance companies find themselves reluctant to cover it because of costs that may run into several hundred million dollars. The 9/11 attacks cost the main insurance companies above $31.7 million dollars and they are no more ready to take similar risks. The premiums themselves become matters of contention.

Thus, it has come about that a lot of insurance companies now leave out the terrorism clause from their standard casualty insurance or property insurance.

In different countries

In the Netherlands, the Dutch government has limited the payments related to terrorism to less than a billion euro in one year. This takes into account stand alone policies as well as those that are part of life insurance or property insurance.

In the US after the 9/11 attacks and with the insurance sector fighting shy of giving out terrorism insurance policies, the Bush government passed an act – The Terrorism Risk Insurance Act – in November 2002. TRIA has been enforced by law to ensure the continued financial capacity of insurers to provide coverage for risks from terrorism. The act was set to expire in December 2005 but, seeing that there is still no solution in sight for terrorism insurance problem, it has been extended for another two years.