The captive insurance industry has seen a new offering of traditional named perils coverage for a new risk category: active assailant attacks.
The captive insurance industry has seen a new offering of traditional named perils coverage for a new risk category: active assailant attacks. But what are they, and how can businesses, schools and institutions protect themselves?
From an insurance perspective, an active assailant attack is defined as a premeditated attack by an armed person or persons, who causes serious bodily injury or death to individuals or groups.
Despite the fact that the most reported events are school shootings, the term ‘active assailant’ can refer to a number of scenarios; as the report ‘Insurers Create New Types of Coverage for Mass Shooting Attacks’ by A.M. Best points out. These attacks are not limited to a particular “location, institution, industry, state or motive”, while weapons can vary from firearms to knives, explosives and corrosive substances.
In its report, A.M. Best cites statistics from the FBI and the Advances Law Enforcement Rapid Response Training (ALERRT) programme, which found that the most frequent locations for active shooter incidents are educational institutions (52 percent), shopping malls (34 percent) and residential property (26 percent).
Generally, it is difficult to gather statistics on active assailant attacks because there is little discernible difference between an active shooter and a simple criminal act. This is because the definitions of these incidents varies between the organisations that track them, including the FBI, Homeland Security, the Gun Violence Archives and the Mass Shooting Tracker.
As Vicky Riggs, financial analyst at A.M. Best, notes, “according to the US Homeland Security definition, an individual assailant actively engages in killing, or attempting to kill, people confined in a populated area with no pattern or selection of victims”.
However, active assailant attacks distinctly differ from traditional acts of terrorism from an insurance perspective because they are not motivated by ideological, political or religious factors, and instead tend to be for personal or psychological reasons.
For this reason, active assailant incidents are not covered by traditional terrorism insurance coverage, which includes property policies that are designed to handle the physical damages of the attack, as well as business interruption, whether direct or collateral.
Active shooter attacks are also neither specifically included nor excluded from commercial general liability policies. These insurers that carry specific exclusions may offer limited first-party cover with contingencies.
David Blades, senior financial analyst at A.M. Best, highlights that “insureds are now realising that their general liability and property coverages do not cover active shooter incidents.”
He continues: “Insureds believed active shooters fell under terrorism cover, but it does not. Therefore, the gap in general liability policies as well as the recent influx of demand are the main factors behind this new category of risks.”
Increased demand has arisen from an increase in the number of active shootings in the US since 2000; in its report, A.M. Best cites FBI figures of 250 such incidents between 2000 and 2017. Furthermore, FBI statistics indicate an increase in the average number of school shootings per year, from 6.7 between 2000 and 2006 to 16.4 between 2007 and 2013, to 22 between 2014 and 2017.
In particular, the shooting at Marjory Stoneman Douglas High School in Parkland, Florida, in January 2018 was an important catalyst for the adoption of active assailant policies, with seven South Florida school districts purchasing $3 million worth of coverage in its aftermath.
Other organisations that have implemented this new named perils coverage include Liberty Mutual, Church Mutual, EMC Insurance and Alliant Insurance.
As A.M. Best’s report stipulates, these “businesses, schools, churches and other types of organisations have a duty to maintain a safe environment for employees, customers, students, parishioners and other visitors”.
The report continues, “specialised, named perils active assailant policies are helping risk managers deliver the responses that their organisations need”.
Previous named perils policies include storm risk, employment practices liability and cyber risk.
A.M. Best also highlights the solution available to schools that sees them pool their liability exposure with other schools, such as the New York Schools Insurance Reciprocal, which was issued by A.M. Best.
Active assailant insurance policies typically cover first-party physical damage to insured property, such as the expenses to tear down, close or relocate a building, or security upgrades, as well as business interruption.
They also provide legal liability coverage for insureds that are obligated to pay for damages if they failed to meet a standard of duty of care to customers, employees or the general public.
Claims expenses included in active assailant policies range from medical expenses and psychological counselling to funeral expenses. Furthermore, coverage extends to brand rehabilitation expenses caused by loss of attraction, as neighbourhoods, schools or brands may face stigmatisation following an attack.
However, Riggs points out that policy coverage “will vary from company to company”, while they sometimes exclude certain provisions, such as casualties above a threshold limit, employees, vehicles or mental anguish.
Unlike a traditional general liability policy, active assailant insurance policies include specific pre- and post-event services.
Pre-attack crisis management services include pre-incident security vulnerability assessments, training modules, and preparedness seminars, which explore both physical security measures and mental health training.
Post-incident crisis management services include event responders, counselling services, and social media coverage and coordination.
Blades affirms that, all too often, “general liability policies fall short of active assailant policies as they may not cover all bills in the aftermath that typically follow a violent incident, including risk assessment prior to an event, crisis management services and reconstruction”.
As A.M. Best notes in its report, no crisis management procedures can wholly prepare an educational or corporate entity for an active assailant attack; however, implementation of such provisions can certainly “ease some of the burdens”, particularly in psychological terms.
