AQOL Archive back to AQOL Archive   Why don't Canadian insurers offer cover for acts of terrorism? Following the terrorist strikes on September 11, 2001, Canadian insurers swiftly introduced new exclusions to remove coverage for acts of terrorism from all standard property/casualty policies, both for commercial and personal lines. Only automobile insurance, which is subject to statutory forms in each province, avoided a terrorism exclusion. Insurers argued that the risks of terrorism strikes were too unpredictable to be included in the standard risk and pricing matrix. The massive scale of the 9/11 attacks seemed to make the point for insurers pretty persuasively. To what extent is Canada a target for international terrorists? Mercifully, we haven't found out yet, but attacks in Madrid and London illustrate the terrorism risk faced by major western countries. Similar acts this year in Jordan, Egypt, Turkey and Bali indicate that countries dependent on western tourism and business face similar risks. As we write this edition of News Board, our national newsmakers appear to alternate between sympathy for suspects held in custody without trial and fear that Canadian authorities haven't prepared adequately for the threat of a terrorist strike here in Canada. Comparing our major cities with those in Europe illustrates this point. London's Metropolitan Police found that evidence provided by public closed-circuit television (CCTV) cameras was extremely useful in identifying the perpetrators of the London bombings and piecing together their routes from home to the sites of their terror strikes. While CCTV evidence did not eliminate terrorist acts, it linked the conspirators to the crimes and may help track down other co-conspirators. Most Canadian cities and public spaces have little public CCTV surveillance, compared with European cities. Last month, the U.K. announced that security measures similar to those at airports would be installed at main-line London railway stations. What should be done to ensure that Canadian homeowners and businesses have access to adequate insurance for acts of terrorism? Many other western countries have introduced initiatives backed by their central government designed to compel or encourage insurers to provide terrorism cover. Britain, which had to cope with terrorism in Northern Ireland and on the mainland, has had such a plan longest, but many other Western countries have similar arrangements. The U.S. federal plan, the Terrorism Risk and Insurance Act (TRIA), which was introduced in 2001, expires this December, and legislators are still debating on what terms it should be renewed. The London bombings will surely have a material impact on that debate. The terrorism exclusion has serious implications for liability insurances as well as property covers. Most provinces maintain a compensation plan for victims of violent crimes who are injured or killed, but the plans offer only the most basic levels of compensation. Victims of a terrorist strike might find it necessary to seek redress in the courts for the balance of any damages they have sustained, perhaps from public authorities and perhaps from other deep-pocket private defendants. We're certain that Canada's anti-terrorism initiatives are very advanced and include considerable, sustained efforts on multiple fronts. By contrast, we believe our wait-and-see position on terrorism insurance serves Canadians poorly. In the event of a terrorism strike on Canadian soil, the absence of a response from property/casualty insurers would not reflect well on our industry. Neither property/casualty insurers nor the federal government appear anxious to tackle this issue, so risk managers, brokers and consumers should demand suitable measures to ensure that insurers are prepared to fulfil their role following a terrorist strike and have a reliable financial backstop against a truly catastrophic event.

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