Captive Insurance Pooling Is an Option for Covering Mass Shooting Attacks

Some insurers have begun offering active assailant insurance coverage in the wake of a marked increase in mass shootings in the United States in recent years. The coverage carries unique features over traditional general liability policies, including risk assessment and crisis management services.

Per A.M. Best, 250 active shootings took place between 2000 and 2017, with an escalating trend during that time frame, according to the FBI. Active shooter attacks differ from acts of terrorism, which typically target specific buildings or locations and trigger coverage from traditional terrorism policies that require property damage for coverage to apply. The standard terrorism policy also requires that the motive be ideological, political, or religious in nature, unlike active shooter attacks, for which the motive may be personal or unclear.

The costs following an active shooter attack can be substantial, and some insureds do not realize that their policies do not cover active shooting incidents; they may believe that this type of attack falls under terrorism coverage, but it does not.

Additionally, a property policy is designed to handle the physical damage of an altercation, but general liability sections do not clearly include or exclude active shooter incidents—a concern for companies that are left footing a huge bill after this type of incident. This gap in general liability policies, as well as marketplace demand, has provided insurers an opportunity to offer traditional named perils coverage for a new category of risk.

In some cases, schools can seek solutions via captive insurance vehicles by pooling their liability exposure to these types of events with other schools.

The services included in active assailant policies may vary by company, but a majority of insurers providing this type of coverage offer a preincident security vulnerability assessment. These policies also cover loss of attraction, since such an attack can stigmatize a neighborhood, business district, or brand, helping with brand rehabilitation as well as to fill in revenue gaps.

For insureds, these policies represent more than an extra budget line item as they also provide resources that help people recover from trauma. A thorough understanding of the basics of violence response policies can help risk managers better serve their companies and stakeholders.

Some of the entities offering active assailant coverage or violent event response include the Lloyd's consortium, led by the Beazley syndicate, XL Catlin through McGowan Companies, Liberty Mutual, EMC Insurance Companies, Church Mutual, and New York Schools Insurance Reciprocal. However, the limits offered for these companies' products differ markedly, from $1 million to $50 million, with minimum premiums starting as low as $1,000 for smaller risks.

Insurers want to help educate communities and businesses on what they can do to protect lives and property before an unlikely threat becomes an unfortunate reality.

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