When most people think of international war and terrorism insurance, the huge losses that major companies faced when planes struck the World Trade Centers in New York on September 11, 2001 usually come to mind. Many insurance companies have since adjusted their coverage for war and terrorism incidents.
Understanding the True Cost of Terrorism
While the political impact of war and terrorism is easy to identify because it's so often in the news, it's not quite so easy to identify the overall cost of acts of terrorism for companies and individuals. Before you can understand the costs, you have to understand what defines terrorism or an act of war. Is being kidnapped by Columbian rebels terrorism? What about a vehicle that you're riding in being sabotaged by a civilian army as an act against a dictatorship government? As you can imagine, many people define terrorism in different ways - so it's important to understand your own insurance coverage before you travel so that you know you're protected if tragedy strikes.
The Shift After 9/11
After the attack of 9/11, and the tremendous costs and lawsuits that insurance companies had to endure, most major insurance companies reexamined their risks and redefined the General Exclusions on most insurance policies to exclude terrorism. Many insurance companies (not all of them) now define and exclude acts of terrorism, such as:
- War or military invasion
- Any act by a foreign enemy
- Local hostilities that erupt within a community you visit
- Weapons of mass destruction of any type
- Any civil war, revolution or insurrection
In other words, if you're traveling to a part of the world that has a very high risk of social unrest or military activity, it's in your best interest to examine your travel insurance policy to make certain that you are protected from any losses incurred should the unimaginable happen.
The Terrorism Risk Insurance Act
It's easy enough for international travelers to switch to travel insurance companies that do not have a terrorism exclusion, but what about large companies that often conduct business overseas and can face major losses upwards of millions of dollars in the event of a major terrorist attack or an act of war?
Immediately following the terrorist attacks of 9/11, the federal government realized that the insurance industry could not absorb the financial losses following such attacks and still remain in business. As a result, in 2002, Congress passed the "Terrorism Risk Insurance Act (TRIA). This Act was passed to provide insurance companies with federal money in the event that the losses from an act of war or a terrorist attack caused losses surpassing a specific "trigger" point. In 2007, that loss limit was 20 percent of the premium amounts for an individual company. After that point, the government would step in and help cover losses. Congress defined the program to last up until 2014.
Buying International War and Terrorism Insurance
According to a 2010 survey by the Marsh global insurance company, 65 percent of companies surveyed had purchased terrorism insurance in 2009. This was nearly double the amount of companies that had purchased terrorism insurance in 2003. The most common industries where companies opt for international war and terrorism insurance are utility, transportation, real estate companies and financial institutions. This is because these are the industries that face the highest risk of loss in the event of international terrorism, due to the global nature of those businesses.
Companies that purchase international war and terrorism insurance do so not only to protect their property and investments throughout the world, but also so that they can provide protection to their employees who need to travel to high risk areas in order to conduct business. For example, a contractor working on an oil infrastructure in a country that is hostile toward foreigners would obviously require such protection, otherwise these companies would not be able to continue doing business overseas.
Terrorism and Travel Insurance
If you're traveling to any area where there is a very real risk of an act of war or terrorism, it's a good idea to explore your options for insurance coverage.
- Kidnap/Ransom and Extortion Insurance - This will pay your ransom and cover any losses due to being kidnapped in places like Columbia or Mexico. If your employer doesn't offer this, consider purchasing a private policy.
- Terrorism Travel Insurance - Usually offered by travel agencies as part of a travel package, this coverage will reimburse the cost of your trip if you have to cancel due to a terrorist attack where you plan to travel. These policies usually include "Trip Interruption" coverage, where you have to go home early due to an attack.
- Special Accidental Death and Dismemberment - If your existing AD&D policy doesn't cover acts of terrorism, you may need to purchase special AD&D policies that do. Most companies with employees working in high risk areas offer this coverage to their employees.
If you own a company that conducts business overseas, or if you're traveling and concerned that the region has a high risk of terrorism or war, explore all of your options so that you and your family will be protected from any loss.