Steamin’ Hot Markets of 2017: Growing Risk of Active Shooters

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Insurance Journal examined industries experiencing changes, challenges, expansions and growth in the past year and picked the top five market sectors that could offer opportunities for agents and brokers in the property/casualty insurance industry in 2017. Each market will be detailed on over the coming days.

Growing Risk of Active Shooters

Sadly, nearly every kind of business or educational institution faces the potential of an active shooter incident and the frequency of these incidents is increasing.

An FBI study of 160 active shooter incidents, defined as one or more individuals actively engaged in killing or attempting to kill people in a populated area, found that between 2000 and 2013 there was an average of 11.4 annually, or one every three weeks. In 2014 and 2015, there were 20 mass shootings per year, according to an analysis of 2014 and 2015 active shooter incidents released by the FBI last year.

That has led to a growing insurance market with policies that provide coverage for both pre- and post-active shooter incident services, including security and risk management, post-event counseling, and coverage for lost income due to reputational damage to the business or institution.

The agencies spearheading the emergence of this market say the education process on why a typical property or general liability policy doesn’t cover an active shooter event has been arduous, but they believe that down the road this market could become the next cyber or employment practices liability insurance.

And, unfortunately, says Hugh Nelson, senior vice president of Southern Insurance Underwriters (SIU) in Atlanta, demand and sales tend to increase after active shooter events.

“When people see that it is a real risk that could affect them… they start looking,” Nelson said.

SIU launched its coverage with Lloyd’s last year for educational institutions and has since expanded it to encompass virtually any entity because of the response it received. SIU’s policy also now has an expanded definition of a weapon to include knives, explosive devices, chemicals, etc., because these events do not always center around shootings, Nelson said.

“What [the coverage] provides is a primary layer of liability coverage that duplicates the GL coverage. If one of these events happens, that liability limit is likely not enough to cover any degree of negligence,” Nelson said. “It is pretty easy to allege negligence – someone can always argue more should have been done to prevent an incident.”

Nelson says while premium growth has been slow, the product is just at the beginning of its cycle. The company also sees steady inquiries and hopes that as entities realize the need they will incorporate the insurance into their budgets.

“The services that are built into this policy really do make it a viable product for them,” he said.

Paul Marshall is program manager for McGowan Program Administrators’ dedicated Active Shooter Division, which launched last year. He says the company has seen a “very big uptick in the submission count and agent broker inquiries.”

The company is doing a massive education campaign, including releasing a video series, and so far its policy count and premium book has “exceeded its expectations.” The program is now backed by its own McGowan Lloyd’s Line Slip and offers lower limit quotes with minimum premiums starting at $500 and limits up to $25 million.

Lloyd’s has led the pack on all active shooter programs, but just this month Ironshore Specialty Casualty’s Public Entity division introduced a policy extension offering institutions of higher education an automatic endorsement for expenses related to natural or man-made incidents, including active shooter and weapon wielding incidents, impacting campus operations.

Nelson said he hopes a new carrier will help spur growth in the market.

“The more it looks like a mainstream product the more it will cause people to think about it and buy it,” he said.

Check back tomorrow for more on opportunities in the transactional risk space…

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