Terrorist attacks have gained a lot of prominence in the global news cycle over the last several months, and there have even been attacks in Canada in the last year and a half or so.
Terrorist attacks have gained a lot of prominence in the global news cycle over the last several months, and there have even been attacks in Canada in the last year and a half. However, while some major nations have seen their large property and casualty insurers begin issuing coverage that specifically includes protections related to terrorist attacks, this has not been the case in Canada. Some experts now wonder, though, whether this is an appropriate step to take given the recent uptick in high-profile incidents.
A recent examination of worldwide terrorism risk named Canada as one of nine countries in the Western world that carries an “increased risk” for such attacks, according to a report from Lexology. However, even the heightened risk kept Canada at a “low” standing in comparison with some of the other major nations such as France and the U.S.
Even with the October 2014 attacks, which struck Canadian troops in small-town Quebec and Ottawa alike, Canadian insurers seem not to be too worried about the potentially increased risk, the report said. But in the wake of the infamous attacks on New York City and Washington, D.C., on Sept. 11, 2001, this kind of coverage became crucial, because the damage caused that day came in at around $40 billion U.S.
Terrorism risk is real, but are Canadian insurers ready?
Big difference
Obviously an attack of that scale anywhere in the world, let alone on Canadian soil, is unlikely, but some experts wonder whether insurers there might want to prepare themselves for just about any kind of attack in a similar way, the report said. Many major countries have either written laws that require companies to offer terrorism insurance – such as the U.S.’s Terrorism Risk Insurance Act of 2002.
Meanwhile, the French government created its own insurance fund known as Gestion de l’assurance et de la Reassurance des Risques Attentats et actes de Terrorisme – GAREAT, for short, and “Insurance Management and Reinsurance of Bombings and Acts of Terrorism Risks” in English, the report said. This allowed insurers offering P/C coverage on French soil to have some of their losses in the event of such an incident mitigated by the government. The U.K., likewise, has its own government-run reinsurance program, but it has been altered to take terrorism risk into the fold, having existed prior to 2001.
How is Canada handling it?
Canada has long recognized the importance of having this kind of coverage plan in place, but little has been done to formalize them, the report said. Many insurers do, however, already include terrorism risk in some of their policies, but whether that will be enough in the event of a major attack – which obviously may or may not actually happen – remains to be seen.
“It is a sad reality that terrorist attacks are becoming more common,” added Nick Kidd, CEO of APRIL Canada. “It’s welcoming to see the continued availability of terrorism coverage available in the market – including on a standalone basis – although it’s somewhat surprising that penetration levels remain relatively low amongst clients.”
This is just something for Canadian insurers to keep in mind going forward, as there is certainly a risk there, and it might be a good idea to come up with strong contingency plans in the relatively unlikely event that a policy decision from the federal government comes down any time soon.
Information about APRIL Canada:
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