The Current Political Climate and the Need for Global Terrorism Insurance

Posted February 05, 2024 in Terrorism Insurance

Most business owners hope to never need global terrorism insurance. However, with increasing awareness of sociopolitical tension worldwide, more owners realize how tenuous national and international security is. This blog will discuss what global terrorism is defined as in insurance terms, what a terrorism policy can cover, and which types of businesses are most likely to need it.

Insurance Policies for a Changing World

At face value, buying insurance is a way to prepare for–and expect–the unexpected. Responsible business owners do their best to protect themselves, their employees, and their businesses from unforeseen disasters, costs, and risks to keep everything afloat. But how does one prepare for something that is, by definition, unpredictable? 

Protecting your business from domestic and global acts of terrorism may seem like an impossible and even illogical choice. Still, costs associated with damages, injury, and business interruption due to terrorist acts or threats are a real possibility that may present itself, especially in a contentious and tense political and cultural climate. 

For more information on how Gallant Risk & Insurance Services, Inc. can help advise you on Global Terrorism Insurance policies, call (951) 368-0700. 

What Is Global Terrorism Insurance?

The Secretary of the Treasury defines a terrorist act as violence or actions (or threats of action) that are dangerous to people, property, or infrastructure made to persuade or coerce people and influence policies. 

It’s also important to define what terrorism means within the context of insurance. An act of terrorism is often defined as an act, including the use of force or violence, of any person or group(s) of persons, whether acting alone or on behalf of or in connection with any organization(s), committed for political, religious, or ideological purposes, including the intention to influence any government and/or to put the public in fear for such purposes. 

So, while the media may portray ‘terrorism’ in a particular way, the above definitions cast a much wider net over how insurance policies may define terrorism and terrorist acts. This is because insurance policies attempt to name and quantify probabilities, and while terrorism itself is an unpredictable force, creating concrete categories of definition makes it more possible to predict.

Terrorism insurance itself has evolved over the last 20 years, as federal policy has stepped in to cover part of the cost with the Terrorism Risk Insurance Act (2002), which has been repeatedly renewed by Congress and is set to expire in 2027. So, suppose a terrorist act has occurred (as defined by the Secretary of State), and losses exceed $5 million under TRIA. In that case, federal reimbursement may be able to help cover insurance claims and help maintain economic stability. 

What Does Global Terrorism Insurance Cover? 

Because a standard business policy does not cover damages caused by terrorism, terrorism risk insurance must be purchased separately or as an endorsement or rider added to a regular business policy. 

Terrorism insurance generally covers the following if losses occur due to terrorist actions or threats: 

• Property
• Liability
• Financial losses

This can include damage to structures and property, injury and loss of life, and cessation of business operations with subsequent financial loss. 

What Types of Businesses Need Terrorism Insurance? 

Determining your business’s value and its probability of risk are essential steps in deciding if you need terrorism insurance. While it is impossible to predict a terrorist attack accurately, there are contributing factors that can make it more likely, and analysis of past patterns can help highlight probability.

Specific characteristics of your business can make it more or less likely to face a terrorist action, such as: 

• Business Location – Rural and residential areas are less likely to be targeted by terrorist action. Commercial urban centers, airports, and train stations have a much higher risk. 

• Type of Business – Certain industries, such as the energy sector, have historically been targeted by terrorist attacks and, therefore, carry more risk. If you are part of a high-risk industry, terrorist insurance can secure your company and help it retain or regain its total value.

Want to Learn More About Global Terrorism Insurance in Southern California?

Protecting your assets and business against terrorist action and threats may be a crucial step for your well-being and the longevity of your business. Discuss your options with a Gallant Risk & Insurance Inc. consultant today to start protecting your bottom line. Call Gallant Risk & Insurance Inc. at (951) 368-0700 today to get started.