Insuring cities against terrorist attacks
Do small towns really need to spend money for terrorism insurance? To collect on such policies, an act of terrorism has to be certified by the U.S. attorney general, the Department of the Treasury and the secretary of state; there also has to be at least $5 million in damage and an intent to coerce or influence U.S. policy; nuclear, biological, chemical, and radiological attacks are excluded
We wrote two weeks ago that reinsurers would like to place more terrorism business, but that the demand for stand-alone terrorism coverage is on the wane. The market could tighten if the Obama administration proceeds with its plan to scale back the federal government’s terrorism insurance backstop, which has been in place since (“Demand for stand-alone terrorism coverage down,” 9 June 2010 HSNW.)
Cities and municipalities in Pennsylvania appear to buck this trend. With its rolling fields interspersed with new housing tracts, Bethlehem Township may be a more likely target for commercial developers and New York transplants than terrorists. This has not stopped the township and several municipalities and small to midsize cities across the country from shelling out thousands of dollars a year on terrorism insurance — primarily to protect public buildings. Bethlehem also has terrorism insurance as well as Hanover Township, Northampton County, and Hellertown.
The Morning Call’s Veronica Torrejón writes that in many cases, the amount is a small fraction of what cities and municipalities pay for general insurance coverage. Whether terrorism coverage is worth any amount is the source of some debate.
To collect on such policies, an act of terrorism has to be certified by the U.S. attorney general, the Department of the Treasury and the secretary of state. There also has to be at least $5 million in damage and an intent to coerce or influence U.S. policy. Nuclear, biological, chemical, and radiological attacks are excluded.
In February, when a man with a grudge against tax authorities crashed a small plane into an IRS building in Texas, it was not considered an act of terrorism, according to news reports.
“The exclusions are so extreme,” David Sanko, executive director of the Pennsylvania State Association of Township Supervisors, said of terrorism insurance. “But if you’ve got a lot of money and you want to throw it away, you certainly can.”
Sanko, a former director of the Pennsylvania Emergency Management Agency, said in lieu of terrorism insurance, townships should consider spending money on public safety and emergency preparedness programs.
Bethlehem Township, with a population of roughly 21,000, already spends a good chunk of its $14.7 million budget on public safety. But the township also is home to the Lehigh Valley’s processing plant for the U.S. Postal Service, which potentially could be a terrorist target like the New Jersey post office that
