Terrorism Insurance

Mumbai was attacked by terrorists like never before and it is being considered as the biggest terror attacks on Mumbai.

 

No one has yet estimated the amount of damage suffered by the Taj and Oberoi Hotels. I saw the picture of Harbour Bar at the Taj Hotel in the Times Of India, it left me speechless, here it is :

                   

Any terrorist attack can cause significant damage to the property. Insurers typically have a risk analysis for any events before they provide cover for it, but I do not think there was any risk analysis ever done for terrorist attacks. The same applied to the 9/11 attack on US. The insurance companies in US post 9/11 stopped giving insurance against terrorist activities.

After September 11, 2001, many businesses were no longer able to purchase insurance protecting against property losses that might occur in future terrorist attacks.Addressing this problem, Congress enacted the Terrorism Risk Insurance Act of 20021 (TRIA) to create a temporary program to share future insured terrorism losses with the property-casualty insurance industry and policyholders. The act  requires insurers to offer terrorism insurance to their commercial policyholders, preserves state regulation of this type of insurance, and directs the Secretary of the Treasury to administer a program for sharing terrorism losses. The three-year program that TRIA created backs up commercial property and casualty insurance, covering up to $100 billion each year after set insurer deductibles. The government pays 90% of insured losses over the deductible, with the insurer paying 10%.

A similar thing might happen with insurance companies in India, with so many terrorist attacks happening frequently. So before buying any insurance, it needs to be ensure that the policy covers damages due to terrorist activities. This is more true for the businesses. So few months back, TOI reported increase in adding terrorism insurance by people in India. It is a sensible move and should be done by everyone.