US policyholders who have had terrorism struck out of their comprehensive property policies should write it back with stand-alone coverage but need to be careful about the definitions used, according to a senior insurance industry executive.
“You have to be very, very clear about what you’re buying,” Zoe Towndrow, London-based practice leader, political violence, for Berry Palmer & Lyle Ltd., known as BPL Global, said during a Wednesday session at Riskworld. Risk & Insurance Management Society Inc. Annual Meeting in Atlanta. “Definitions of terrorism tend to be very broad when used for exclusions and very narrow when used for coverage.”
After the attacks of September 11, 2001, terrorism coverage changed for American policyholders. “Before 9/11, it was put in property policies with no problem. Underwriters had no problem with it,” Towndrow said. After 9/11, terrorism was treated as a war risk and excluded from all risk property policies, she said.
A stand-alone terrorism policy will write the exposure of politically, religiously or ideologically motivated acts back into the property coverage, but will not cover certain types of strikes, riots and civil strife that are excluded by the war exclusion, potentially leaving a gap in an insured’s coverage, said Ms Towndrow. This makes a stand-alone terrorism policy “not a complete answer” to writing back into coverage everything excluded by the property terrorism exclusion, she said.
Towndrow cautioned against viewing the Terrorism Risk Insurance Act, which was signed into law in 2002 and extended or reauthorized in 2005, 2007, 2015 and 2019, as a solution to potential coverage gaps because the law requires an incident to be certified as terrorism by three government officials, something that has yet to be has not happened.