We all like to think we live in a world where nothing bad ever happens. Up until 9/11, there had been occasional events the government called home-grown terrorist attacks. You may remember Ted Kaczynski who achieved notoriety as the Unabomber, sending out bombs through the mail for some twenty years, and Timothy McVeigh who was responsible for the greatest loss of life through the Oklahoma City Bombing. These are rare individuals who become unhappy with the way things are and resort to extreme measures.
This was a containable risk until Al-Qaeda highjacked four airplanes and crashed three of them into high-visibility targets. We might have considered this outrage a unique event but, for a variety of political reasons, America has continued military actions abroad. No matter what you might think of this form of action overseas, all informed sources confirm this action acts as a recruiting tool for groups of terrorists. For now, their retaliation has been against troops or targets based abroad. But we would be foolish if we ignore the risk of direct action on our soil.
Following the 9/11 attack, President Bush pushed through the Terrorism Risk Insurance Act. This puts federal money on the line until 2014. By this time, the private insurance industry is supposed to come up with a proper framework to support the risk of loss and damage caused by terrorists anywhere within our borders. Until then, the Treasury acts as a reinsurer and, if the Secretary of the Treasury certifies losses caused by terrorism, it pays 90c in the dollar of every claim approved by private insurers. And, just so you understand the value of this back-up, no commercial insurance company can refuse to insure a business against terrorist risks. It’s your right to be covered at an affordable rate. Should an insurance company refuse, you can make a formal complaint and the company will face a fine.
Why should you consider this? You may have noticed that things are not going so well in Afghanistan. Some of our soldiers have failed to live up to our high expectations of honor. There has been a public burning of the Koran. A soldier recently decided to kill a few local Afghans for fun. This does nothing to improve America’s reputation with the Moslem world and everything to encourage extreme groups to retaliate. So far, they have aimed their anger at the troops and other soft targets abroad. But there may come a time when they decide to come to America. So if you run a business that might be a target or your business premises are close to a likely target, you should talk to your business insurance agent. If there look to be problems, remind your agent this form of insurance has been standard in countries where terrorism has been relatively common over the decades. So, for example, Pool Re was set up in 1993 to re-insure the market as the IRA continued its bombing campaign on British soil. It now offers reinsurance cover for France and Spain as well. The German government offers direct support like the US. Your business insurance agent should tell you US risks are priced as a percentage of your property value. Since these values have been falling because of the recession, terrorism insurance is more affordable.