September 11, 2011, changed America, forever. Today, ten years later, there will be tons of news coverage of the events of that day, and discussions of how things have changed. Instead of reiterating what you will see in many other places, I’m going to note how September 11 affected insurance.
It has been estimated that around 50,000 people worked in the World Trade Center. There were 430 different companies that were housed in the World Trade Center, which came from 28 different countries. Among those businesses were several insurance companies.
Insurance companies that had offices in Tower One included: Empire Health Choice, Kemper Insurance Companies, A I G Aviation Brokerage, Inc., Hal Roth Agency, Inc., Partner Reinsurance Corp., Daynard & Van Thunen Co., RLI Insurance Company, Metropolitan Life Insurance Co., and Marsh USA.
In Tower Two, there were insurance offices for SCOR U.S. Corporation, Allstate Insurance Company, Hartford Steam Boiler, Frenkel & Company, Inc., Guy Carpenter, Seabury & Smith, and AON Corporation. I’ve no idea exactly how many employees these companies had, or how many were present, on that day.
Immediately after September 11, 2011, the insurance industry as a whole was faced with financial losses of somewhere between $30 billion and $40 billion. At that time, very few insurance companies had policies that provided coverage for acts of terrorism.
The Terrorism Risk Insurance Act of 2002 was something that allowed the insurance industry to increase it’s ability to create stand-alone terrorism insurance policies. There have been an increasing number of these types of policies sold since then.
In the past ten years, the insurance industry has learned how to create effective terrorism risk underwriting tools. They are still working on improving their ability to predict loss due to acts of terrorism, and to come up with practical ways of lessening terrorism exposure. Today, “terrorism insurance” can cover situations that include exposure to biological or chemical threats, as well as instances of cyber terrorism threats.
Your life insurance policy will not pay out the death benefit to your family if you die due to “an act of war”. However, acts of terrorism are not included in the definition of “an act of war”. This means that if you happen to die from an event that was caused by an act of terrorism then your insurance company will pay out the death benefit to your beneficiary.
A terrorism insurance policy will provide coverage to individuals, or to businesses, for potential losses due to acts of terrorism. In short, it gives the policy owner “extra” coverage to fill in the gaps left by their other insurance policies.
For example, if your home blows up due to an act of terrorism, and then catches fire, your homeowners insurance will probably cover the damages due to the fire, (but not for the explosion). The terrorism insurance could cover the damage from the actual explosion. It can also provide businesses with some compensation for the timespan where their business is interrupted, (and they cannot make a profit).
Image by Rafael Amado Deras on Flickr