Active assailant policies have evolved significantly to offer broader coverage, fill gaps in traditional insurance policies and incorporate more of a risk management approach as these events become more frequent, experts say.

Such evolution is critical due to the unpredictable nature of these events, uncertain motivations by the perpetrators and the challenges of ensuring the safety of individuals in open access or high-foot-traffic environments, experts say. These factors have been reflected in several fatal shooting incidents in the past 10 days: 22 killed at a Walmart Inc. store in El Paso on Saturday, and two employees killed at a Walmart facility in Southaven, Mississippi, on July 30; nine people, not including the gunman, killed in Dayton, Ohio, on Saturday; and three attendees, not including the gunman, perishing at the Gilroy Garlic Festival in Gilroy, California, on July 28.

“The entire Walmart family is heartbroken by the loss of two valued members of our team,” Greg Foran, president and CEO of Walmart U.S., said in a statement on July 30 on the Southaven shooting incident while a separate company statement in both English and Spanish expressed “shock over the tragic events” in El Paso.

“We are heartbroken that senseless violence brought this year’s festival to such a terrible and tragic end,” Shawn Keck, president of the 2019 Gilroy Garlic Festival, said in a statement on July 29.

According to FBI data, 250 active shootings took place between 2000-2017 – data cited by the A.M. Best Co. Inc. in a special report called Insurers Create New Types of Coverage for Mass Shooting Attacks. From 2000 to 2006, shooting incidents averaged 6.7 a year, jumping to 16.4 a year from 2007 to 2013, and then averaging 22 a year between 2014 and 2017.

USI Insurance Services LLC has “unfortunately” been involved in dealing with a number of active shooter events in the last 12 to 18 months, but the last, unidentified incident the broker dealt with was “pretty horrific” because of the number of fatalities, said John Meder, executive vice president of USI’s risk advisory practice based in Raleigh, North Carolina. Every insurance policy of the policyholder had came into play, including its property, general liability, automobile, employment practices liability, employee benefit, and directors and officers policies.

“Not all of them ended up having to respond, but that’s the magnitude of these types of losses — that there is such an interplay that takes place,” Mr. Meder said. “When something like that happens, you run the risk of having gray areas in standard insurance policies that may give rise to a (claim) being denied, and that’s what really makes that active shooter coverage more appealing to certain industry groups,” particularly those with substantial public exposure such as hospitality and education.

The active shooter or assailant policies aim to fill the gap that exists between standard terrorism, property and general liability policies, experts say.

“Insureds thought their GL policy or their property policy covered these events,” said Vicky Riggs, senior financial analyst for the Oldwick, New Jersey-based ratings firm and co-author of the Best report. “The GL policies often fell short of the huge expenses involved and the needs that typically follow a violent incident. They also thought these types of attacks fell under terrorism, which it typically does not.”

A terrorism policy requires that the motive be ideological, political or religious in nature, while an act must meet specific criteria to be certified as terrorism under the Terrorism Risk Insurance Program Reauthorization Act of 2015, including certification by the secretary of the treasury, which has never happened. Law enforcement officials in Texas said the El Paso shooter published a manifesto that indicates that the shooting was a potential hate crime and is being treated as a domestic terrorism incident.

“The attack in El Paso, Texas, underscores the continued threat posed by domestic violent extremists and perpetrators of hate crimes,” the FBI said in a statement Sunday.

But such certification “is not an easy task as there are specific requirements spelled out in TRIA that must be met to qualify as an act of terrorism,” Mr. Meder said in a follow-up email. “If the event is certified as an act of terrorism, it could trigger coverage for those insureds purchasing terrorism insurance coverage. In addition, it allows insurance carriers paying claims under an act of terrorism to seek reimbursement from the federal government.”

Attackers have a range of motives, with some having multiple motives, according to a July report by the U.S. Secret Service called Mass Attacks in Public Spaces. The report identified 27 incidents of mass attacks – in which three or more persons were harmed – carried out in the United States between January and December 2018, killing 91 people and injuring 107 more in locations such as workplaces and schools. In 52% of these incidents, grievances appeared to be the main motivating factor.

“What we see in active assailant attacks is that there’s often no clear motivation,” said Peter Bransden, vice president of crisis management for Aspen Insurance Holdings Ltd. based in Miami.

These active assailant insurance policies define this type of attack more broadly than the typical definitions of terrorism, according to the Best report.

Though most of the attacks identified in the Secret Service report were carried out using a firearm, three attackers used vehicles.

“The actual endorsement does have to be based on an intentional criminal act, but it doesn’t necessarily have to involve a gun,” said Emily Crawford, senior director of liability product management for Liberty Mutual Insurance Co. based in Charlotte, North Carolina. “It does have to involve some kind of physical object: a knife or a weapon of any kind. It would not include things like cyberbullying, unless the cyberbullying led to some kind of physical event.”

In addition, a property policy handles the physical damage of an altercation, but general liability sections do not clearly include or exclude active shooter incidents, according to the Best report.

“A commercial general liability policy is not designed to respond to these events — it simply needs a claim,” said Paul Marshall, managing director of the active shooter/workplace violence insurance programs division of McGowan Program Administrators in Dayton, Ohio. “Our policy is just helping the victims. If we do that right, there won’t be any claims.”

Insurers are seeing strong demand for active assailant policies, which have been around since 2011, but “have become more popular in the past three years, amid mounting anxieties about violent attacks,” the Best report stated.

McGowan bound more than 125 policies just for the month of July — a new record — representing more than $1 million in premium, Mr. Marshall said.

“As more incidents arise, just seeing the magnitude of the losses that are being incurred, that should drive demand,” said Joshua Pestano, president of broker Risk Reinsurance Holdings Inc. in Davie, Florida. “As for the policies themselves, I think it would become more clear that the extra coverages that they provide are really essential.”

The policies can cover physical damage — including potential expenses incurred with tearing down, closing or relocating a building — business interruption, medical costs — which may include costs for psychological counseling post-attack – legal liability, funeral expenses and death benefits for victims, and loss of attraction or brand rehabilitation expenses, according to the report.

“There’s a big demand from clients for insurance solutions that don’t just protect against losses, but step in to help treat communities,” Mr. Bransden said.

Despite rising demand, the pricing for the active assailant coverage has declined, particularly as new insurers have entered the space, with Mr. Marshall expecting five additional insurers to offer the coverage by the end of the year. Initially, his company was quoting about $5 per student, for example, but now the pricing has declined to about 50 cents to $1 per student.

Up to $100 million in limits can be offered, but most clients have limits in the $1 million to $5 million range, according to brokers and insurers.

School, college or universities have been the number one setting for active shooter events, with 52 incidents taking place in these settings from 2000 to 2016, according to the FBI data.

“It’s absolutely a significant issue and challenge for schools and school districts and colleges and universities,” said Doug Manwaring, Cincinnati-based chief underwriting officer of public entity for Liberty Mutual. “The primary focus is on prevention and mitigation.”

Threat assessment is one of the most effective practices for prevention and has been adapted to prevent all forms of targeted violence, regardless of motivation, including K-12 school shootings and acts of workplace violence, according to the Secret Service report. When implemented effectively, a threat assessment generally involves identifying the individual to law enforcement or someone else with a public safety responsibility — or in educational settings or workplaces, reporting concerns to a multidisciplinary threat assessment team that works with law enforcement when needed — and assessing the situation to determine how any risk of violence can be managed, including a focus on early intervention.

Emergency response plans for both educational institutions and businesses should include procedures for reporting and reacting to an active shooter incident and clear and specific directions of what employees and staff should do in the case of an emergency, the Best report noted. As part of the risk mitigation and preparation process, schools go through live campus drills that emphasize real-time responses, coordination of efforts and dissemination of results.

Insurers are playing a critical role in supporting their clients’ risk mitigation efforts by offering preincident training and vulnerability assessments and preparedness seminars — with some insurers offering premium credits for policyholders that engage in such efforts, while others offer such services for free through their loss control departments, experts say.

“The best risk management approach is to approach it from the standpoint of making those assessments ahead of time and be able to hopefully help the insured prepare and protect themselves ahead of time,” said David Blades, associate director in the industry research and analytics department of Best and co-author of the report. “The nature of these types of events is unpredictable, but I do think risk management has gotten more important.”