XL Group terrorism insurance includes radiological contamination coverage

With a month to go before the United States government backstop for commercial terrorism insurance expires, XL Group plc announced Monday it is offering stand-alone terrorism coverage of up to US$100 million.

Dublin-based XL Group said its new terrorism insurance policy, offered by its United States crisis management business, “provides insurance coverage often limited or excluded by other terrorism markets for business interruption, extra expense, loss of rental income, service interruption and radiological contamination.”

With limits of up to US$100 million available, XL Group’s new coverage includes a “broad definition of terrorism including coverage for political, religious and ideological purposes,” the company stated. It would also cover sabotage.

 Under the Terrorism Risk and Insurance Act (TRIA), commercial insurers in the U.S. are essentially required to cover losses in incidents which are “certified” by the federal government as terrorist acts, and the federal government provides a backstop. But that law expires Dec. 31, and to date, the Senate and House of Representatives have yet to on a version of a bill that would extend coverage.

With an extension of TRIA “still in question or uncertainty around what the scope of protection in the future might look like if it’s extended, many businesses do not want to leave their terrorism insurance protection in question,” stated Ben Tucker, head of XL Group’s U.S. War, Terrorism and Political Violence underwriting team.

In order to trigger TRIA coverage, an incident must be certified as a terrorist act by the U.S. Secretary of State, Attorney General and Secretary of the Treasury, Risk and Insurance Management Society Inc. (RIMS) noted in a report released in 2013.

It would have to result in losses exceeding $5 million in the U.S and would have to result in aggregate losses to the insurance industry of more than $100 million. There is a deductible, to the private insurers, of 20% of their annual direct earned premiums from commercial P&C lines, RIMS noted at the time, adding the federal government covers 85% of the insurer’s loss above the deductible, until the total losses are $100 billion.

The TRIA Reform Act of 2014 was approved last June by the House of Representatives Committee on Financial Services but has yet to be put before the full house for a vote. In June, the Senate passed a different bill, called the Terrorism Risk Insurance Program Reauthorization Act of 2014.

In order to be passed into law, conference comprised of members of both houses of Congress would have to work out differences between their versions of a bill before sending it to the President.