Some of the questions regarding how U. S. insurance companies would respond to the new risk of terrorism were answered in November 2001 when the Insurance Services Office filed terrorism exclusions to be used by their member companies on property and casualty insurance policies. The exclusions would eventually be approved in forty-five states. While the U. S. Congress debated a federal reinsurance program for terrorism, some insurers began using these exclusions, while others developed their own.

Federal Reinsurance

A year later in November 2002, some insurers and business leaders experienced a sense of relief when the U.S. government enacted the U.S. Terrorism Risk Insurance Act of 2002 (TRIA). The Act created a partial reinsurance mechanism for losses associated with an "act of terrorism" (as defined in the Act); nullified previous terrorism exclusions on existing insurance policies (to the extent they excluded an "act of terrorism" as defined in the Act); required participating insurers to provide specific, limited, coverage; and imposed a new set of duties upon the insurance industry. Not surprisingly, as the details of the new legislation became known, it did not offer the solutions expected.
In the mean time, camp directors and other business owners and managers are wondering if they will be able to buy insurance for terrorism. The answer appears to be yes, at least for now. But, the available coverage is not comprehensive insurance protection for terrorism.

Insured Losses

The Act restricts the exclusion of insurance coverage for terrorism, but only obliges insurers to provide the coverage defined in the Act. The Act defines "insured losses" as "any loss covered by property and casualty insurance that is caused by an "act of terrorism," if such loss:

• occurs within the United States;
• occurs to an air carrier, to a U.S. flag vessel (or vessel based in the U.S.), regardless of where the loss occurs; or
• occurs at the premises of any U.S. Mission.

TRIA defines an "act of terrorism:"

• to be a violent act, or an act that is dangerous to human life, property, or infrastructure;
• to have resulted in damage within the U.S., or outside the U.S., in the case of U.S. Missions, air carriers, and vessels; and
• to have been committed by an individual or individuals acting on behalf of any foreign person or foreign interest, as part of an effort to coerce the civilian population of the U.S., or to influence the policy or affect the conduct of the U.S. government by coercion.

Furthermore, the Act requires that the Secretary of the Treasury, Secretary of State, and Attorney General of the United States certify each "act of terrorism." An "act of terrorism" cannot be certified unless total property and casualty insurance losses resulting from the act exceed $5 million.

The Act requires insurance companies to notify their customers that coverage is available for "acts of terrorism." The insurers will be able to charge an additional premium for the coverage. The rates will vary from company to company. Once notified of the availability of coverage, insurers may re-instate exclusions for "acts of terrorism" if:

• the insured authorizes the re-instatement in writing; or
• the customer fails to pay any stated additional premium.

Incomplete Solution

In summary, camp directors and other business owners and managers should now be able to buy property and liability insurance for damage and injury arising out of a certified "act of terrorism" - if the circumstances meet the criteria, thresholds, and triggers outlined above. An act DOES NOT qualify as an "act of terrorism" if it fails to meet these requirements. If it does not meet the requirements, it is not an "insured loss." The net effect is the Act only provides for a partial transfer of the risk of terrorism.

Uncertainty Remains

TRIA leaves a number of issues unanswered. For example, will insurance for noncertified acts of terrorism be available? The legislation doesn't address this issue. The voluntary reinsurance market for the terrorism risk is very limited. It is likely insurance for non-certified acts of terrorism will not be available to most businesses, including camps, because of the uncertainties associated with the war on terror. We understand the Insurance Services Office is in the process of revising their War, Military Action, and Terrorism exclusions that were developed prior to the passage of TRIA. What this means to consumers and risk managers isn't clear at this time.
Other unresolved issues are the risks of nuclear, biological, and chemical terror. Insurance for these terrorism risks may not be available. But, time will tell.

What Should You Do?

Use the risk management process. Take some time to identify the potential threats arising from terrorist acts at or near your camp. Consider the risks. These include where your camp is located, your clientele, your staff, your facilities, and the proximity of facilities or operations that might be considered terrorist targets. Do some contingency planning. Consider "what if" scenarios. Build emergency, crisis response, and evacuation plans if you think there is a risk of terrorism at your camp. Do you need increased security at your camp? How would you alert campers and staff in an emergency? How would you communicate with parents? How would you transport campers? Where would you go if you were forced to evacuate as the result of orders from civil authorities? How would you feed everyone, provide water, medications, etc.?

Check with your local Red Cross, FEMA, Fire and Police Departments to determine what plans they have made to respond in the event of terrorist activity. These organizations are already in communication with each other and have developed plans as part of the overall effort to increase and maintain homeland security. They may help you answer some questions and reduce some of the risks as a result of their preparations.

Stay informed. Ask your insurance broker to update you on the availability of terrorism insurance from your camp insurance underwriter. Ask your insurance advisor to explain the scope of the insurance coverage being offered. Get the advice of your insurance representative before deciding to buy terrorism insurance. Realize there may be circumstances involving acts of terrorism, which will not be covered by insurance. Identify those gaps in your insurance program and apply the risk management process to the remaining exposures.

Take the risk of terrorism seriously, but don't let it incapacitate you - or your staff and campers. The risks of terrorism are still unfolding and being identified. Don't wait until something happens to take action. Knowledge and the discipline of the risk management process are important tools to help you manage terrorism risk, as well as all the other risks, which confront your camp every day. Build your risk management and crisis response plans and teams. Pick good people to work for you. Be prepared!