Terrorism Insurance 1.docx

PRAHLADRAI DALMIA LIONS COLLEGE OF COMMERCE & ECONOMICS

TERRORISM INSURANCE

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PRAHLADRAI DALMIA LIONS COLLEGE OF COMMERCE & ECONOMICS

INSURANCE INTRODUCTION TO INSURANCE

MEANING Insurance is a means of protection from financial loss. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss. An entity which provides insurance is known as an insurer, insurance company, insurance carrier or underwriter. A person or entity who buys insurance is known as an insured or as a policyholder. The insurance transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer's promise to compensate the insured in the event of a covered loss. The loss may or may not be financial, but it must be reducible to financial terms, and usually involves something in which the insured has an insurable interest established by ownership, possession, or pre-existing relationship. The insured receives a contract called the insurance policy, which details the conditions and circumstances under which the insurer will compensate the insured. The amount of money charged by the insurer to the insured for the coverage set forth in the insurance policy is called the premium. If the insured experiences a loss which is potentially covered by the insurance policy, the insured submits a claim to the insurer for processing by a claims adjuster. The insurer may hedge its own risk by taking out reinsurance, whereby another insurance company agrees to carry some of the risk, especially if the primary insurer deems the risk too large for it to carry.

Insurance is the equitable transfer of the risk of a loss, from one entity to another in exchange for payment. It is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. An insurer, or insurance carrier, is a company selling the insurance; the insured, or policyholder, is the person or entity buying the insurance policy. The amount of money to be charged for a certain amount of insurance coverage is called the premium. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice. The transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer's promise to compensate (indemnify) the insured in the case of a financial (personal) loss. The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insured will be financially compensated. TERRORISM INSURANCE

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Basic Terms used in Insurance

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Insured: The party or the individual who seeks protection against a specified task and entitled to receive payment from the insurer in the event of happening of stated event is known as insured. An insured is normally in insurance policy holder.

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Insurer: The party who promises to pay indemnity the insured on the happening of contingency is known as insurer. The insurer is an insurance company.

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Beneficiaries: The person or the party to whom the policy proceeds will be paid in the event of the death or happening of any contingency is called beneficiary.

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Contract: An agreement binding at law between two or more parties is called contract.

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Premium: The amount which is paid to the insurer by the insured in consideration to insurance contract is known as premium. It may be paid on monthly, quarterly, half yearly, yearly or as agreed upon it is the price for an insurance policy .Insured sum: The sum for which the risk is insured is called the insured sum, or the policy money or the face value of the policy. This is the maximum liability of the insurer towards the insured.

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Peril: A peril is an event that causes a personal or property loss by fire, windstorm, explosion, collision premature death, sickness, floods, dishonesty etc.

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Damages: Monetary compensation award at law for a civil wrong or breach of contract.

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Indemnity: Compensation for actual loss suffered is call indemnity.

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Reinsurance: Reinsurance is a method where by the original insurer transfer all or part of risk he has assumed to another company or companies with the object of reducing his own commitment to an reducing his own commitment to an amount that he can bear for his own account commensurate with his financial resources in the event of loss. It was originally confined to offers and acceptances on individual risk known as facultative reinsurance transactions.

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Double Insurance: Double insurance implies that subject matter is insured in two or more insurance companies (insurers) and the total sum insured exceeds the actual value of subject matter. In other words, the same subject matter is insured in more than one insurer.

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PRAHLADRAI DALMIA LIONS COLLEGE OF COMMERCE & ECONOMICS 

No claim bonus: The bonus is getting under the policy, if the claim is not reported during the policy period and after that the time renewal (in time) then as per the policy term no claim bonus is avail for the vehicle insurance policy and the rate of bonus is different in different general insurance companies, and the maximum rate should be up to 50% as per the norms.

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PRINCIPLES OF INSURANCE 

Principal of Utmost Good Faith Parties, insurer and insured should enter into contract in good faith Insured should provide all the information that impacts the subject matter Insurer should provide all the details regarding insurance contract For example - John took a health insurance policy. At the time of taking policy, he was a smoker and he didn't disclose this fact. He got cancer. Insurance company won't pay anything as John didn't reveal the important facts.

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Principle of Insurable Interest Insured must have the insurable interest on the subject matter In case of life insurance spouse and dependents have insurable interest in the life of a person. Corporations also have insurable interests in the life of it's employees In case of life or marine insurance, insured must be the owner both at the time of entering of entering into the insurance contract and at the time of accident.

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Principle of Indemnity Insured can't make any profit from the insurance contract. Insurance contract is meant for coverage of losses only 55 Indemnity means a guarantee to put the insured in the position as he was before accident This principle doesn't apply to life insurance contracts

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Principle of Contribution In case the insured took more than one insurance policy for same subject matter, he/she can't make profit by making claim for same loss more than once For example - Raj has a property worth Rs.5, 00,000. He took insurance from Company A worth Rs.3, 00,000 and from Company B - Rs.1, 00,000. In case of accident, he incurred a loss of Rs.3, 00,000 to the property. Raj can claim Rs. Rs.3, 00,000 from A but after that he can't make profit by making a claim from Company B. Now Company A can make a claim from Company B to for proportional loss claim value.

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Principle of Subrogation

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PRAHLADRAI DALMIA LIONS COLLEGE OF COMMERCE & ECONOMICS After the insured gets the claim money, the insurer steps into the shoes of insured. After making the payment insurance claim, the insurer becomes the owner of subject matter. For example: - Ram took a insurance policy for his Car. In an accident his car totally damaged. Insurer paid the full policy value to insured. Now Ram can't sell the scrap remained after the scrap. 

Principle of Loss Minimization This principle states that the insured must take all the necessary steps to minimize the losses to inured assets. For example - Ram took insurance policy of his house. In an cylinder blast, his house burnt. He should have called nearest fire station so that the loss could be minimized.

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Principle of Cause Proxima Word "Cause Proxima" means "Nearest Cause" An accident may be caused by more than one cause. In case property insured for only one cause. In such case nearest cause of the accident is found out. Insurer pays the claim money only if the nearest cause is insured

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TYPES OF INSURANCE

Any risk that can be quantified can potentially be insured. Specific kinds of risk that may give rise to claims are known as perils. An insurance policy will set out in detail which perils are covered by the policy and which are not. Below are non-exhaustive lists of the many different types of insurance that exist. A single policy may cover risks in one or more of the categories set out below. For example, vehicle insurance would typically cover both the property risk (theft or damage to the vehicle) and the liability risk (legal claims arising from an accident). A home insurance policy in the US typically includes coverage for damage to the home and the owner's belongings, certain legal claims against the owner, and even a small amount of coverage for medical expenses of guests who are injured on the owner's property. Business insurance can take a number of different forms, such as the various kinds of professional liability insurance, also called professional indemnity (PI), which are discussed below under that name; and the business owner's policy (BOP), which packages into one

Policy many of the kinds of coverage that a business owner needs, in a way analogous to how homeowners' insurance packages the coverage’s that a homeowner needs. Auto insurance Auto insurance protects the policyholder against financial loss in the event of an incident involving a vehicle they own, such as in a traffic collision. Coverage typically includes: 

Property coverage, for damage to or theft of the car

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Liability coverage, for the legal responsibility to others for bodily injury or property damage

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Medical coverage, for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses. Health insurance Health insurance policies cover the cost of medical treatments. Dental insurance, like medical insurance protects policyholders for dental costs. In the US and Canada, dental insurance is often part of an employer's benefits package, along with health insurance. Accident, sickness, and unemployment insurance

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Disability insurance policies provide financial support in the event of the policyholder becoming unable to work because of disabling illness or injury. It provides monthly support to help pay such obligations as mortgage loans and credit cards. Short-term and long-term disability policies are available to individuals, but considering the expense, long-term policies are generally obtained TERRORISM INSURANCE

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PRAHLADRAI DALMIA LIONS COLLEGE OF COMMERCE & ECONOMICS only by those with at least six-figure incomes, such as doctors, lawyers, etc. Short-term disability insurance covers a person for a period typically up to six months, paying a stipend each month to cover medical bills and other necessities. 

Long-term disability insurance covers an individual's expenses for the long term, up until such time as they are considered permanently disabled and thereafter. Insurance companies will often try to encourage the person back into employment in preference to and before declaring them unable to work at all and therefore totally disabled.

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Disability overhead insurance allows business owners to cover the overhead expenses of their business while they are unable to work.

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Total permanent disability insurance provides benefits when a person is permanently disabled and can no longer work in their profession, often taken as an adjunct to life insurance.

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Workers' compensation insurance replaces all or part of a worker's wages lost and accompanying medical expenses incurred because of a job-related injury.

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Casualty Insurance

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Casualty insurance insures against accidents, not necessarily tied to any specific property. It is a broad spectrum of insurance that a number of other types of insurance could be classified, such as auto, workers compensation, and some liability insurances.

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Crime insurance is a form of casualty insurance that covers the policyholder against losses arising from the criminal acts of third parties. For example, a company can obtain crime insurance to cover losses arising from theft or embezzlement.

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Political risk insurance is a form of casualty insurance that can be taken out by businesses with operations in countries in which there is a risk that revolution or other political conditions could result in a loss. Life Insurance Life insurance provides a monetary benefit to a decedent's family or other designated beneficiary, and may specifically provide for income to an insured person's family, burial, funeral and other final expenses. Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or an annuity. In most states, a person cannot purchase a policy on another person without their knowledge. Annuities provide a stream of payments and are generally classified as insurance because they are issued by insurance companies, are regulated as insurance, and require the same kinds of actuarial and investment management expertise that life insurance requires. Annuities and pensions that pay a benefit for life are sometimes regarded as insurance against the possibility that a retiree will outlive his or her financial resources. In that sense, they are the complement of life insurance and, from an underwriting TERRORISM INSURANCE

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PRAHLADRAI DALMIA LIONS COLLEGE OF COMMERCE & ECONOMICS perspective, are the mirror image of life insurance. Certain life insurance contracts accumulate cash values, which may be taken by the insured if the policy is surrendered or which may be borrowed against. Some policies, such as annuities and endowment policies, are financial instruments to accumulate or liquidate wealth when it is needed. In many countries, such as the United States and the UK, the tax law provides that the interest on this cash value is not taxable under certain circumstances. This leads to widespread use of life insurance as a tax-efficient method of saving as well as protection in the event of early death.

Burial insurance Burial insurance is a very old type of life insurance which is paid out upon death to cover final expenses, such as the cost of a funeral. The Greeks and Romans introduced burial insurance c. 600 CE when they organized guilds called "benevolent societies" which cared for the surviving families and paid funeral expenses of members upon death. Guilds in the Middle Ages served a similar purpose, as did friendly societies during Victorian times.

Property Insurance Property insurance provides protection against risks to property, such as fire, theft or weather damage. This may include specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance, inland marine insurance or boiler insurance. The term property insurance may, like casualty insurance, be used as a broad category of various subtypes of insurance, some of which are listed below: 

Aviation insurance protects aircraft hulls and spares, and associated liability risks, such as passenger and third-party liability. Airports may also appear under this subcategory, including air traffic control and refueling operations for international airports through to smaller domestic exposures.

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Boiler insurance (also known as boiler and machinery insurance, or equipment breakdown insurance) insures against accidental physical damage to boilers, equipment or machinery.

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Builder's risk insurance insures against the risk of physical loss or damage to property during construction. Builder's risk insurance is typically written on an "all risk" basis covering damage arising from any cause (including the negligence of the insured) not otherwise expressly excluded. Builder's risk insurance is coverage that protects a person's or organizations insurable interest in materials, fixtures and/or equipment being used in the construction or renovation of a building or structure should those items sustain physical loss or damage from an insured peril.

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PRAHLADRAI DALMIA LIONS COLLEGE OF COMMERCE & ECONOMICS 

Crop insurance may be purchased by farmers to reduce or manage various risks associated with growing crops. Such risks include crop loss or damage caused by weather, hail, drought, frost damage, insects, or disease.

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Earthquake insurance is a form of property insurance that pays the policyholder in the event of an earthquake that causes damage to the property. Most ordinary home insurance policies do not cover earthquake damage. Earthquake insurance policies generally feature a high deductible. Rates depend on location and hence the likelihood of an earthquake, as well as the construction of the home.

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Fidelity bond is a form of casualty insurance that covers policyholders for losses incurred as a result of fraudulent acts by specified individuals. It usually insures a business for losses caused by the dishonest acts of its employees.

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Flood insurance protects against property loss due to flooding. Many insurers in the US do not provide flood insurance in some parts of the country. In response to this, the federal government created the National Flood Insurance Program which serves as the insurer of last resort.

Home

insurance, also commonly called hazard insurance or homeowners insurance (often abbreviated in the real estate industry as HOI), provides coverage for damage or destruction of the policyholder's home. In some geographical areas, the policy may exclude certain types of risks, such as flood or earthquake, that require additional coverage. Maintenance-related issues are

typically the homeowner's responsibility. The policy may include inventory, or this can be bought as a separate policy, especially for people who rent housing. In some countries, insurers offer a package which may include liability and legal responsibility for injuries and property damage caused by members of the household, including pets. 

Landlord insurance covers residential and commercial properties which are rented to others. Most homeowners' insurance covers only owner-occupied homes.

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Marine insurance and marine cargo insurance cover the loss or damage of vessels at sea or on inland waterways, and of cargo in transit, regardless of the method of transit. When the owner of the cargo and the carrier are separate corporations, marine cargo insurance typically compensates the owner of cargo for losses sustained from fire, shipwreck, etc., but excludes losses that can be recovered from the carrier or the carrier's insurance. Many marine insurance underwriters will include "time element" coverage in such policies, which extends the indemnity to cover loss of profit and other business expenses attributable to the delay caused by a covered loss.

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Supplemental natural disaster insurance covers specified expenses after a natural disaster renders the policyholder's home uninhabitable. Periodic payments are made directly to the insured until TERRORISM INSURANCE

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PRAHLADRAI DALMIA LIONS COLLEGE OF COMMERCE & ECONOMICS the home is rebuilt or a specified time period has elapsed.

Surety bond insurance is a three-party

insurance guaranteeing the performance of the principal. 

Terrorism insurance provides protection against any loss or damage caused by terrorist activities. In the United States in the wake of 9/11, the Terrorism Risk Insurance Act 2002 (TRIA) set up a federal Program providing a transparent system of shared public and private compensation for insured losses resulting from acts of terrorism. The program was extended until the end of 2014 by the Terrorism Risk Insurance Program Reauthorization Act 2007 (TRIPRA).

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Volcano insurance is a specialized insurance protecting against damage arising specifically from volcanic eruptions.

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Windstorm insurance is an insurance covering the damage that can be caused by wind events such as hurricanes.

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ROLE OF INSURANCE

Insurance has evolved as a process of safeguarding the interest of people from loss and uncertainty. It may be described as a social device to reduce or eliminate risk of loss to life and property. Insurance contributes a lot to the general economic growth of the society by provides stability to the functioning of process. The insurance industries develop financial institutions and reduce uncertainties by improving financial resources. 

Provide safety and security: Insurance provide financial support and reduce uncertainties in business and human life. It provides safety and security against particular event. There is always a fear of sudden loss. Insurance provides a cover against any sudden loss. For example, in case of life insurance financial assistance is provided to the family of the insured on his death. In case of other insurance security is provided against the loss due to fire, marine, accidents etc.

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Generates financial resources: Insurance generate funds by collecting premium. These funds are invested in government securities and stock. These funds are gainfully employed in industrial development of a country for generating more funds and utilized for the economic development of the country. Employment opportunities are increased by big investments leading to capital formation.

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Life insurance encourages savings: Insurance does not only protect against risks and uncertainties, but also provides an investment channel too. Life insurance enables systematic savings due to payment of regular premium. Life insurance provides a mode of investment. It develops a habit of saving money by paying premium. The insured get the lump sum amount at the maturity of the contract. Thus life insurance encourages savings.

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Promotes economic growth: Insurance generates significant impact on the economy by mobilizing domestic savings. Insurance turn accumulated capital into productive investments. Insurance enables to mitigate loss, financial stability and promotes trade and commerce activities those results into economic growth and development. Thus, insurance plays a crucial role in sustainable growth of an economy.

 Medical support: A medical insurance considered essential in managing risk in health. Anyone can be a victim of critical illness unexpectedly. And rising medical expense is of great concern. Medical Insurance is one of the insurance policies that cater for different type of health risks. The insured gets a medical support in case of medical insurance policy.

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PRAHLADRAI DALMIA LIONS COLLEGE OF COMMERCE & ECONOMICS 

Spreading of risk: Insurance facilitates spreading of risk from the insured to the insurer. The basic principle of insurance is to spread risk among a large number of people. A large number of persons get insurance policies and pay premium to the insurer. Whenever a loss occurs, it is compensated out of funds of the insurer.

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Source of collecting funds: Large funds are collected by the way of premium. These funds are utilized in the industrial development of a country, which accelerates the economic growth. Employment opportunities are increased by such big investments. Thus, insurance has become an important source of capital formation.

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ADVANTAGE OF INSURSNCE 

Risk Cover: life is full of uncertainties, so insurance helps your family members to continue to enjoy a good quality of life from unforeseen events and to cover the risk of loss.

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Protection from rising health expenses: The cost of health insurance is increasing day by day so at this time, insurance protects the people from diseases and hospital expenses.

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Planning for future needs: It also helps as long-term investments. It helps people to meet their future goals like children’s education, marriage, and building home planning and plan for relaxed retired life.

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Assured income through annuities: Insurance is one of the instruments for retirement planning. Money saved at the time of earning life and that money will be utilized after retirement.

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TERRORISM

MEANING Terrorism is a violent and criminal act which not only affects the victim but public at large also. The plan of terrorists by violence is to attract the concentration of the local resident, government and world for the publicity of their cause. The successfulness of the terrorist act does not only rely upon the degree of violence only but depends upon the reaction of public and government. Take example, in 1972, at the Munich Olympics, the terrorist group “Black September Organization” attacked and murdered 11 Israelis. Although, the Israelis players were the instant victims but the original target of this terrorist attack was the public at large who were watching the game on television and to create fear to them which was their ultimate goal. The fear of terrorism act can be caused by the threat of physical harm or death, loss to property. In November 2004, a Unite Nations Secretary General report described terrorism as “any act intended to cause death or serious bodily harm to civilians or non-combatants with the purpose of intimidating a population or compelling a government or an international organization to do or abstain from doing any act". In the international community, there is no criminal law definition of terrorism which is legally recognized. The Common definitions of terrorism mentions only to those violent acts targeted the civilians for the purpose of causing cause fear for achieving the religious, political, or ideological goal. Some definitions now include acts of violence and war. The use of similar strategies by criminal organizations for protection of their illegal acts usually not labeled as terrorism, though these same acts may be labeled terrorism when done by a politically motivated group. The use of the term has also been criticized for undue matching it with Islamism or Jihadism, while ignoring non Islamic organizations or individuals. It is very difficult to define the terrorism, precisely. There are more than 100 definitions of terrorism as per its Studies. In some cases, a organization may be mentioned as terrorist group by its opponent or the same may be described as freedom fighters by its followers. The concept of terrorism may be controversial as it is often used by state authorities and individuals with access to state support to delegitimize political or other opponents, and potentially legitimize the state's own use of armed force against opponents (such use of force may be described as "terror" by opponents of the state). At the same time, the reverse may also take place when states perpetrate or are accused of perpetrating state terrorism. The usage of the term has a controversial history, with individuals such as ANC leader Nelson Mandela at one point also branded a terrorist.

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PRAHLADRAI DALMIA LIONS COLLEGE OF COMMERCE & ECONOMICS Terrorism has been used by many political organizations to achieve their aims. It has been used by religious groups, revolutionaries, ruling governments and both rightwing and left-wing political parties. The characteristic of terrorism is use of violence against innocent peoples for the purpose of gaining publicity for their group and objectives. The violent acts of terrorism can exploit human fear to gain these goals.

DEFINITION The definition of terrorism has found to be controversial. The different legal systems and government draw divergent definitions of terrorism. The international community has not formed an agreed and binding definition of terrorism to the world. These difficulties came up, as the word terrorism, relates to emotions of public at large and politically motivated also. In this regard, Angus Martyn, briefing the Australian Parliament has stated: “The international community has never succeeded in developing an accepted comprehensive definition of terrorism. During the 1970s and 1980s, the United Nations attempts to define the term floundered mainly due to Differences of opinion between various members about the use of violence in the context of conflicts over national liberation and self-determination.”

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TYPE OF TERRORIM Terrorism has been defined, differently, by scholars, lawmakers and security professionals. The scholars of USA, started to differentiate the types of terrorism in the year 1970. After a decade, many international and domestic terrorist groups bloomed. At that time, the modern terrorist groups started to utilize different ways of terrorist acts like bombing, hijacking, assassination and diplomatic kidnapping to fulfill their goals and for the first time, they were noticed as real threats to Western Countries, in the eyes of researchers, politicians, laws enforcement authorities and law makers. They started to differentiate the types of terrorism in to counter it.

B

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PRAHLADRAI DALMIA LIONS COLLEGE OF COMMERCE & ECONOMICS Bioterrorism In this type of terrorism, the biological toxins are used to hurt and frighten innocent citizens, in the name of a political or other cause. The U.S. Center for Disease Control has categorized the viruses, bacteria and toxins that could be used in an attack. They are: 

Anthrax (Bacillus anthracis)

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Botulism (Clostridium botul inum toxin)

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The Plague (Yersinia pestis)

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Smallpox (Variola major)

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Tularemia (Francisellatularensis)

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PRAHLADRAI DALMIA LIONS COLLEGE OF COMMERCE & ECONOMICS Cyber terrorism: In this type of terrorism, the terrorists utilize information technology to affect public at large and get attention to their aim. This may mean that they use information technology, like telecommunications, computers and internet, as a tool to organize a conventional attack. In cyber terrorism, by using information techno loud radically interrupt the services which are connected with internet. For example, cyber terrorists can hack into networks housing for getting critical financial information or disable networked emergency systems. Cyber terrorism is a use of internet for terrorist activities like, large-scale disruption of computer networks, especially computers attached to the Internet, by the means of computer viruses.

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Eco terrorism: Eco terrorism is new type of terrorism, using violence for interest of environment. For example, the environmental extremists damage property of industries to save the animals and natural environment. These industries include logging companies, fur companies and animal research laboratories. The FBI defines eco-terrorism as "the use or threatened use of violence of a criminal nature against innocent victims or property by an environmentally-oriented, sub national group for environmental political reasons, or aimed at an audience beyond the target, often of a symbolic nature." The term eco-terrorism is controversial and political. The accusation of eco-terrorism against environmentalists who are mainly non-violent has been used by companies and others who are the reasons of environmentalists' charges. The environmentalist groups minimally, make use of violence against the civilians, as tactic, to spread fear, rather they prefer property harm or destruction. According to media watchdog Source watch, "since 1990 there have been numerous attempts made by industry front groups, PR firms and conservative think-tanks to associate environmental activism with terrorism."

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Nuclear terrorism: Nuclear terrorism means different type of use of nuclear material by the terrorists. It includes attacking nuclear facilities, preparing nuclear weapons or purchasing nuclear weapons, or finding ways to scatter radioactive materials. A terrorist assault on a nuclear research centre or nuclear power plant can be cause of the release of nuclear material. The consequences of an attack on a nuclear research centre or nuclear power plant could equal or exceed the effects of the 1986 Chernobyl disaster in USSR, which led to 30 deaths from radiation sickness, 1800 cases of childhood thyroid cancer, the evacuation of one Lakhs persons and the radioactive contamination of huge area of land in numerous countries. Additionally, as explained in the British Medical Journal21, in 2002, an attack on stores of spent nuclear fuels poses as much, if not more, of an attack risk. A second way terrorists can exploit radioactive materials would be by creating a “dirty bomb”22 by planting a conventional bomb with radioactive materials. It would scatter when the bomb exploded. Terrorists also can purchase existing nuclear weapons in the black market.

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Political terrorism: Political terrorism means use of violence in order to create fear in the civilians for political purpose. The terrorist groups usually use violence to overthrow or destabilize the government but in some cases, the dictatorial governments also use terror to maintain their power or to suppress their opponents. “Since the 11th September attacks on the United States 2001, which resulted in the destruction of the World Trade Center in New York City and severe damage to the Pentagon in Washington, D.C., the United States has changed its priorities to focus upon eradicating terrorism in the world. Terrorism involves the systematic use of terror or violence to achieve political goals. The targets of terrorism include government officials, identified individuals or groups, and innocent by standers. In most cases terrorist seek to overthrow or destabilize an existing political regime, but totalitarian and dictatorial governments also use terror to maintain their power”.

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PRAHLADRAI DALMIA LIONS COLLEGE OF COMMERCE & ECONOMICS State terrorism: In this type of terrorism, the act of violence is being conducted by Nation against the other nation or against its own citizens. This type of terrorism is different from state sponsored terrorism, in which nation sponsors terrorist groups who holding power in a country. The state terrorism is the systematic use of terror by a government in order to control its citizens. The 1793 French Revolution, in which thousands of peoples had executed, is usually mentioned as the first illustration of state terrorism. In history, every dictator has utilized this type of terrorism in order to control his population. The more contemporary example is, use of violence against the Kurds by Saddam Hussein or the suppression of democratic protestors in Syria.

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Religious terrorism: In this type of terrorism, the terrorist groups perform terrorist activities, on the basis of faith oriented tenets. From centuries, the terrorist acts have been performed on religious basis with a view to spread or enforce a system of belief, or opinion of their religion on others. In this type of terrorism, does not necessarily define a specific religious view, but, usually defines the view of groups of people or interpretation of teachings that belief.

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Motivations of terrorists As well as there being no one agreed definition of terrorism, there is a similar lack of consensus regarding the causes – or motivations behind – terrorism. Numerous studies have identified certain behavioural and situational characteristics that are common, and perhaps causal, to the consequence of terrorism, specific analysis of case studies have led to suggested motivations to individual historical acts. A report conducted by Paul Gill, John Horgan and Paige Deckert on behalf of The Department of security of UK highlights the vast discrepencies between individual cases of terrorism recorded. To begin with, 43 percent of lone wolf terrorism is motivated by religious beliefs. The same report indicates that just less than a third (32 percent) have pre-existing mental health disorders, while many more are found to have these problems upon arrest. At least 37 percent lived alone at the time of their event planning and/or execution, a further 26 percent lived with others, and no data were available for the remaining cases. 40 percent were unemployed at the time of their arrest or terrorist event. 19 percent subjectively experienced being disrespected by others, while 14 percent experienced being the victim of verbal or physical assault.

Intimidation Attacks on 'collaborators' are used to intimidate people from cooperating with the state in order to undermine state control. This strategy was used in Ireland, in Kenya, in Algeria and in Cyprus during their independence struggles. International Attention This strategy was used by Al-Qaeda in its attacks on the World Trade Center and the Pentagon in the United States on September 11, 2001. These attacks are used to draw international attention to struggles that are otherwise unreported, such as the Palestinian airplane hijackings in 1970 and the 1975 Dutch train hostage crisis. Local/internal social standing Abrahm suggests that terrorist organizations do not select terrorism for its political effectiveness. Individual terrorists tend to be motivated more by a desire for social solidarity with other members of their organization than by political platforms or strategic objectives, which are often murky and undefined.

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PRAHLADRAI DALMIA LIONS COLLEGE OF COMMERCE & ECONOMICS Cultural tolerance of violence Additionally, Michael Mousseau shows possible relationships between the type of economy within a country and ideology associated with terrorism. Many terrorists have a history of domestic violence. Religious beliefs/zealotry According to Paul Gill, John Horgan and Paige Deckert on behalf of The Department of security of UK, 43 percent of lone wolf terrorism is motivated by religious beliefs. The same report indicates that Just less than a third (32 percent) have pre-existing mental health disorders, while many are found to have these problems upon arrest. At least 37 percent lived alone at the time of their event planning and/or execution, a further 26 percent lived with others, and no data were available for the remaining cases. 40 percent were unemployed at the time of their arrest or terrorist event. Many were chronically unemployed and consistently struggled to hold any form of employment for a significant amount of time. 19 percent subjectively experienced being disrespected by others, while 14.3 percent experienced being the victim of verbal or physical assault.

Mental Health Ariel Merari , a psychologist who has studied the psychological profiles of suicide terrorists since 1983 through media reports that contained biographical details, interviews with the suicides’ families, and interviews with jailed would-be suicide attackers, concluded that they were unlikely to be psychologically abnormal. In comparison to economic theories of criminal behaviour, Scott Atran found that suicide terrorists exhibit none of the socially dysfunctional attributes – such as fatherless, friendless, jobless situations – or suicidal symptoms. By which he means, they do not kill themselves simply out of hopelessness or a sense of 'having nothing to lose'.

Nationalism Although a common factor in terrorism is a strong religious belief there are other factors such as cultural, social and political that wholly preclude religion. For example, the drive behind these Chechen terrorists are quite distinct and unique from others. Many of the Chechens considered themselves secular freedom fighters, nationalist insurgents seeking to establish an independent secular state of Chechnya. Although a distinction should be made between national Chechen terrorists and non-Chechen fighters who have adopted the idea from abroad. Few Chechen fighters fought for the jihads whereas most of the non-Chechen fighters did Janeczk , 2014).

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Financial support for family Another factor are perceived assurances of financial stability for the actor's families, that they are given when they join a terrorist organization or complete an attempt of terror. An extra grant is provided for the families of suicide bombers.

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PRAHLADRAI DALMIA LIONS COLLEGE OF COMMERCE & ECONOMICS

FEATURES OF TERRORISM OF INSURANCE

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Terrorist attacks so far in India have resulted in loss of human life and damage to public and government property and damage to corporate property was minimal. In most life insurance products, the basic sum assured is paid to survivors in case of death of the insured due to any reason other than suicide in the first year. Life insurers do not pay doubleaccident benefit if the death occurs due to act of terrorism or war, as it is one of the chief exclusions mentioned in the policy wordings. Major surgical benefit covers only stipulated surgeries and hence no benefit is payable if a policy holder undergoes surgeries arising out of an act of terrorism. Some of the salient features of terror cover as an add-on are: Terrorism cover is taken as an add -on cover by payment of additional premium at the option of the insured. The sum insured opted for can include material damage & business interruption. The maximum aggregate loss may vary from company to company. The premium charged will vary based on the risk occupancy (i.e. industrial/non industrial /residential) and on the sum insured. Mid-term inclusion of terrorism coverage is not allowed. Terrorism cover has to be taken only in conjunction with property or engineering covers.

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TERRORISM RISK INSURANCE ACT

The Terrorism Risk Insurance Act (TRIA) is a United States federal law signed into law by President George W. Bush on November 26, 2002. The Act created a federal "backstop" for insurance claims related to acts of terrorism. The Act "provides for a transparent system of shared public and private compensation for insured losses resulting from acts of terrorism. The Act was originally set to expire December 31, 2005, was extended for two years in December 2005, and was extended again on December 26, 2007. The Terrorism Risk Insurance Program Reauthorization Act expired on December 31, 2014. On January 7, 2015 the House of Representatives voted 416-5 to approve the Terrorism Risk Insurance Program Reauthorization Act of 2015, extending the TRIA through the year 2020. The Senate approved the extension the day after by a vote of 93-4. On January 12, 2015, President Barack Obama signed the extension into law .TRIA was extended for a third time under the Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIPRA of 2015) and is scheduled to expire on December 31, 2020.

What is the Terrorism Risk Insurance Act (TRIA)/Terrorism Risk Insurance Program Reauthorization Act (TRIPRA)? TRIA is a public/private risk-sharing partnership between the federal government and the insurance industry. The program is designed to ensure that adequate resources are available for businesses to recover and rebuild if they become the victims of a terrorist attack. TRIA was extended for another two years in December 2005 and for another seven years to 2014 in December 2007. The new law is known as the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) of 2007. Specific provisions of the legislation are: 

An event must cause at least $100 million in aggregate property and casualty insurance losses to be certified by the Secretary of the Treasury as an act of terrorism.

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The definition of a certified act of terrorism has been expanded to cover both domestic and foreign acts of terrorism.

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Each participating insurer is responsible for paying out a certain amount in claims—a deductible— before Federal assistance becomes available.

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For losses above a company’s deductible, the federal government will cover 85 percent, while the insurer contributes 15 percent.

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PRAHLADRAI DALMIA LIONS COLLEGE OF COMMERCE & ECONOMICS 

The aggregate insurance industry retention in 2007 is $27.5 billion, up from $25 billion in 2006 and $15 billion in 2005. Insurance Information Institute 23

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Losses covered by the program are capped at $100 billion.

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Lines originally excluded from the program are: personal lines (auto and home), reinsurance, federal crop, mortgage guaranty, financial guaranty, medical, malpractice , flood insurance provided under the NFIP, and life and health. Additional lines now excluded are: commercial auto, professional liability except for directors and officers liability, surety, burglary and theft, and farmowners multi-peril insurance.

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The Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) of 2007—is due to sunset on December 31, 2014.

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INSURANCE AND REINSURANCE OF TERRORISM RISK

Terrorism is a new risk posing challenge for the insurance industry. The terrorist acts of September 11, 2001 have caused many changes in the global terror insurance market. One major trend is the exclusion of terror risk in contracts by numerous insurance and reinsurance companies globally. The Mumbai terror attacks have put the spotlight on terrorism and the need for insurance against such acts. Many companies are unaware of the level of terror risk faced by them. And, even after buying terror covers for their properties and possible business disruptions, companies do not clearly know how the personal and property claims from a terror attack could impact their profitability. Simultaneously, many governments are becoming more involved in mitigating the risk exposure of insurance and reinsurance companies. Further, a number of countries have developed specific terror pools addressing the risks of terrorism. Terrorism insurance is mostly offered as a rider or add-on cover to the main policies by domestic insurers. Internationally, it is available even as a standalone policy. The terrorist attacks which took place over the past two decades have significantly altered the economic and security settings world over. In this direction the insurance industry and Governments around the world are enduring to create and refine the risk management facilities and systems. Terrorist attacks in our country and around the different parts of globe, elevate significant issues related to the economic blow of terrorism on individuals, businesses, governments, and insurance companies. Ever since the September 11 terrorist attacks that hit the US, the conditions on terrorism insurance markets have enhanced considerably. Indian insurers have reported a marked increase in the demand for terrorism cover in the 2009. The demand is naturally being linked to concerns following the Mumbai attacks of November 2008. Insurers observed the global situation, as India follows the international market. The perception of terrorism differs in India as government property and religious places are not insured. With the growing occurrence of terrorist attacks globally, international insurance players felt the dire need for ‘private and public partnership in financing risk. The insurance of terrorism risks in the Indian market is undertaken through a pool system. The Market Terrorism Risk Insurance Pool has been in existence since April 1 2002 and was India’s response to the significant increase in premium rates following the attack on the World Trade Centre on September 11 2001. The many appalling terrorist events and the ensuing economic losses globally have prompted insurers and reinsurers to change the way they approach terror coverage. Furthermore, while private insurers increasingly are excluding terror coverage, many governments are becoming more involved in mitigating the risk exposure of insurance and reinsurance companies. Countries have arrived at differing solutions to cover the risks of terrorism, depending on their economic, political and historical experiences. Some countries like the United States, Australia, TERRORISM INSURANCE

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PRAHLADRAI DALMIA LIONS COLLEGE OF COMMERCE & ECONOMICS Spain, France and Germany have developed comprehensive programs for terror coverage, while many other countries currently have no terror pool or government involvement in terror coverage.

TERRORISM RISK Terrorism risk in this form is new not only to the India, but for the entire world. This risk is not well defined, and also there is very inadequate experience or actuarial statistics on it. Experts have jotted down three major components in Terrorism risk, namely: 1. Threat, 2. Vulnerability, and 3. Consequence. With this the insurance companies started customarily excluding or limiting coverage for terrorist acts in the policies issued. And wherever the terrorism insurance was provided, it was quite pricey, with difficult to find required coverage and impracticable to obtain. Thus the individuals as well as businesses are either compelled to accept additional costs of insurance or are incapable to carry out business owing to financing necessities to bear terrorism insurance. Also businesses are now taking considerably added risk exposure that elevates apprehensions concerning the possible economic impact of disastrous terrorist attacks. Terrorism primarily affects the economy and aim to create maximum loss to the target city or region in terms of men and material. Hence the possible consequences of terrorist attacks need to be taken into account when quantifying terrorism risk. Consequence can be defined as the extent and type of damage resulting from successful terrorist attacks. In order to measure the consequence, it is required to quantify the expected magnitude of damage e.g., deaths, injuries, or property damage, given a specific attack type, at a specific time, that results in damage to a specific target.

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PRAHLADRAI DALMIA LIONS COLLEGE OF COMMERCE & ECONOMICS TERRORISM RISK POOL

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India has an edge over developed countries when it comes to terrorism insurance. The Indian general insurance industry had set up its own independent terrorism pool after the 9/11 attacks on the US. In contrast, the developed world had to rely on individual governments to establish a separate terrorism pool to take care of probable contingencies. The India Market Terrorism Pool was set up in 2002 with a sum of Rs 200 crore (Rs 2 billion) after the 9/11 attack on the World Trade Centre in New York. The terrorism pool is essentially a corpus of funds collected from all insurers to offset possible future losses arising out of such violence. India, decided to set up its own terrorism insurance pool, pricing the risk cover at 50 paise for every Rs 1,000 sum assured that is value of the property, in the case of industrial risks and 30 paise for every Rs 1,000 sum assured in the case of non-industrial risks. The pool enables pool members to write terrorism risks on an individual basis using the combined capacity of all pool members plus GIC Re. Under the existing version of the Terrorism Pool Agreement, the pool is effective for only certain classes of risk. The pool actually covers companies/institutions for a liability of Rs 750 crore (Rs 7.50 billion), including material or property loss or damage. However, the pool actually covers major companies/institutions for a liability of Rs 750 crore, including material or property loss or damage. So if an individual wants such a cover, he would need to ask for it as a add-on to the existing insurance cover. The India Market Terrorism Risk Insurance Pool (IMTRIP) is a domestic pool organized by India’s reinsurer, General Insurance Corporation Re (GIC Re), under Regulation 8 of the Insurance Regulatory Development Authority (General Insurance – Reinsurance) Regulations 2002. One of its aims is to maximize the retention of insurance business within India. The General Insurance Company manages a pool of fund for terror insurance of Rs 1,200 crore (Rs 12 billion) as mandated by the Insurance Regulatory and Development Authority. Unlike some other agreements between general insurers in India, participation in the Terrorism Pool Agreement is voluntary, but almost all general insurers participate. Classes of risk are listed in the Terrorism Pool Agreement, but the Pool Underwriting Committee can specify other classes of business. The Pool Underwriting Committee, which is constituted by the pool members, is also responsible for setting rates, terms, conditions and maximum limits of liability for terrorism risks that can be assumed by the pool. GIC Re is the pool manager and has a share in risks ceded to the pool. GIC Re takes 1% of the original premium as its management and administration charge.

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