The Future of Closing the Protection Gap in Terrorism Insurance

Terrorism is one of the most complex risks businesses face today. Traditional terrorism insurance is typically designed to cover physical damage to property and the resulting loss of revenue. The problem is that coverage usually only applies when the insured premises themselves suffer direct damage. If an incident occurs nearby but does not physically affect the location, the significant revenue losses that follow often fall outside the scope of protection. This leaves a major gap for businesses most at risk.

A hotel, stadium, or retail center does not need to be directly damaged to suffer. If an event happens nearby, visitors stay away, events are canceled, and revenues fall. Yet under most conventional terrorism policies, without direct damage at the premises, the policy often does not respond.

A clear example of this is the 2013 Boston Marathon bombing. While the explosion directly damaged only part of Boylston Street, the financial impact radiated far beyond. Restaurants, hotels, and retailers across downtown Boston saw steep declines in customers as the area was shut down and people avoided crowded venues in the aftermath. Many of these businesses suffered meaningful financial loss, but because there was no direct property damage at their specific locations, their insurance coverage was often limited or nonexistent.

This is precisely the type of gap parametric insurance is built to close. Traditional policies typically require direct physical damage to trigger coverage, which often excludes the real financial impact businesses face after an event. Parametric terrorism insurance works differently. Coverage is triggered by the occurrence of a terrorism incident within a defined radius of the insured location. Proof of loss is still required, but the process is simplified: the event trigger is objective, the loss measurement is more transparent, and claims are resolved faster and with fewer disputes.

Imagine a hotel in Times Square or a sports arena in Los Angeles. Even if no physical damage occurs, the economic impact of lost attraction following a nearby event can be severe. With parametric coverage, the insured receives financial protection for what matters most: revenue disruption, not just property damage.

At LIRG, we believe parametric terrorism insurance is not just an innovation, but a necessary evolution. It aligns coverage with the way losses actually happen, ensures businesses are not left unprotected, and provides certainty in the face of unpredictable threats.

The future of (re)insurance is here. Discover parametric solutions that offer speed, fairness, and transparency while redefining how (re)insurance works.