Overview

Prior to the September 11 terrorist attacks, various insurance products that insurance companies sold to policyholders covered losses due to terrorism.Insurance provided by property and casualty insurers is divided into personal lines (homeowners', renters', and automobile insurance) and commercial lines. Most commercial property insurance coverage is written through what is called an all risk or all perils insurance policy. Such all risk policies cover loss to the insured property from all causes except those that are expressly excluded. There are a number of exclusions that have been adopted over the years, one common, long-standing one being the exclusion of losses from acts of war. General liability policies, covering third-party claims against the insured, generally work in the same way. Under life insurance policies, claims are paid upon death, with very few exclusions. An exception to the general exclusion framework is workers' compensation insurance, which covers workrelated injury or death however caused, even if by an act of war or terrorism. Specialty insurance programs also developed to provide coverage for perils that were excluded from all risk policies. For example, aviation war-risk insurance, an endorsement to some general aviation policies, covers hull damage and liability claims from acts of war and terrorism, and specialty insurers have long provided coverage for acts of war, terrorism, and piracy in the maritime shipping industry.While prior to September 11 most commercial property and casualty policies sold in the U.S. excluded losses from acts of war, generally speaking, most policies did not exclude losses from terrorism. Policies covered terrorism despite the fact that foreign sponsored terrorist attacks had occurred or were attempted against U.S. properties prior to September 11, most notably the February 26, 1993 bombing of the World Trade Center ($510 million in insured losses) and the December 1999 attempted bombing of the Los Angeles Airport by Ahmed Ressam (often referred to as the millennium bomber ). Domestic terrorist attacks occurred as well, including the April 19, 1995 bombing of the Alfred P. Murrah Federal Building in Oklahoma City ($125 million in insured losses). From the perspective of insurance companies, September 11 was a realization of risks that had existed, even in the U.S. The magnitude, however, far exceeded general expectations. Insured losses from September 11 are currently estimated at $32.5 billion, including property, life, and liability claims.5 Hence, the September 11 attacks led to an increased desire among insurance companies to exclude terrorism risk from all risk policies.

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9781500682569

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