Oct Mon, 2016 Insurance
On 10 October, the Insurance Journal wrote that the UK’s government-backed Pool Re, which covers commercial property losses from terror attacks, had launched the International Forum of Terrorism Risk Re/Insurance Pools (IFTRIP.) IFTRIP is designed to build relationships and increase cooperation amongst other national pool res around the world. It was started in response to the dramatic increase in global terrorism.
The Insurance Journal reported the following key points about IFTRIP:
ARPC Chief Executive, Dr. Christopher Wallace, said of IFTRIP, “It is important that we collaborate with other terrorism reinsurance pools which share our vision of the vital role pools play in underpinning economic resilience. I also hope the Forum can be part of a more robust international response to the evolving terrorism threat.”
IFTRIP is a new concept, and Muir Analytics has reached out to its principles to ascertain more information, such as how often will it meet, will it have a website with useful information for commercial sector outreach, and what countries are involved.
It is not yet clear how IFTRIP participants will address terrorism and insurance. Will they have a risk assessment branch? Will they have an actuarial section? Will they take an underwriting type approach? Will they discuss how to calibrate policies?
Overall, the IFTRIP concept looks highly useful, and it is long overdue, but its positive impact on terrorism insurance remains to be seen. National pool res come with scores of caveats that can inhibit coverage. For example, in some cases, the amount of money available for payouts is capped, or payouts are offered on a first come/first serve basis, and damages in some instances must reach over $5 million (as with the Terrorism Risk Insurance Program Reauthorization Act – TRIPRA – in the US) in order to qualify for a payout.
Additionally – and this is key – governments get to decide what qualifies as a terror attack. The Boston Marathon bombings in 2013, for example, were not considered terrorism by the US government regarding insurance issues. So just because an attack might be correctly and justifiably blamed on terrorism, it does not mean that governments will activate their terrorism pool res and initiate insurance payouts to the affected parties.
Accordingly, while IFTRIP seems like an excellent idea, commercial entities, hotels included, should stay abreast of IFTRIP’s activities and monitor how it impacts their respective home country’s pool res. It could be that the coverage becomes more restrictive to ease the burden on national budgets and taxpayers. On the other hand, IFTRIP might cause national pools to expand coverage. Only time will tell.
Sources and further reading:
“Take1 Insurance Launches Terrorism, Crisis Coverage for Special Events,” Insurance Journal, 17 October 2016.
“ARPC joins International Forum of Terrorism Risk Reinsurance Pools,” Australian Reinsurance Pool Corporation, 14 October 2014.
“International Forum of Terrorism Risk Re/Insurance Pools Launched,” Insurance Journal, 10 October 2016.
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