Catastrophe Risk Insurance & Terrorism
Catastrophic risk insurance protects against losses in case of catastrophe. Catastrophic risk insurance originally covered only severe weather and other random natural events. Catastrophic risk insurance can also cover man-made catastrophes such as terrorism.
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Natural Catastrophes
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Natural catastrophes covered by catastrophic risk insurance include lighting strikes, hurricanes, and earthquakes. Catastrophic risk insurance policies can also cover typhoons and wind storms. Catastrophe risk insurance does not cover floods or fires.
Man-Made Catastrophes
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Man-made catastrophes are defined as any unforeseeable disasters caused by other humans. These include industrial accidents, war and terrorism. Catastrophic risk insurance specifically to protect from losses by terrorism is called terrorism insurance.
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History
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Before 2001, the United States insurance industry covered terrorism under general property and casualty insurance claims. After the September 11, 2001 attacks and the billions in related claims, insurers began to issue new policies that excluded coverage caused by terrorist attacks. This led to the United States government providing catastrophic risk insurance in case of terrorist attacks.
Expert Insight
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The United States government provides terrorism risk insurance on losses over $50 million if the government certifies loss was due to a terrorist attack. Nations belonging to the Organization for Economic Co-operation and Development offer government-backed catastrophic risk insurance for terrorism. Private insurers are reluctant to provide terrorism insurance due to the high losses terrorism can cause.
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References
Resources
- Photo Credit War on terrorism image by steven Husk from Fotolia.com
