Brokers and others are still sorting out how last week's Boston Marathon bombing attack will affect two key insurance markets — events and promotions and terrorism.
Also unknown is what effect the attacks might have on efforts to extend the federal government's terrorism insurance backstop program, which is to expire on Dec. 31, 2014.
Underwriters have begun asking questions about their appetite to underwrite sporting events and what can be done to make them safer, said Bob Murphy, Marsh Inc.'s New York-based global sports, entertainment and events practice leader.
“Questions about capacity, pricing, and terms and conditions have been raised already,” Mr. Murphy said.
Most events of the scale of the Boston Marathon likely would carry some form of terrorism coverage, but Mr. Murphy said he had no details of the marathon's insurance program.
There likely will not be a large insured loss in the event and promotion market, said one London-based source who asked not to be named. Uncertainty about the source of the bombings means it is too early to tell what effect, if any, they will have on the terrorism insurance market.
Unlike the cancelation of the 2012 New York Marathon because of Superstorm Sandy, the Boston Marathon bombing case is unlikely to have a big effect on the contingency and cancellation insurance markets in London, said another source who asked not to be named. Because many competitors completed the marathon before the explosives were detonated, advertisements, product placements, promotional events and merchandising had already largely taken place. That would result in limited contingency claims, the source said.
“The insurance of sports events is likely to be impacted by the Boston Marathon bombs,” Gordon Woo, a catastrophist at Newark, Calif.-based Risk Management Services Inc., said in a statement.
“The shortage of terrorism insurance cover in the years after 9/11 led to the securitization of the cancellation risk of the 2006 FIFA World Cup,” Mr. Woo said. “So while the property insurance loss is small, the Boston Marathon bombing may well have a significant influence on the terrorism insurance market.”
While officials said the marathon bombing was the first successful terrorist attack since 2001, it likely will have little effect on the stand-alone terrorism market, said Kelly Crouch, head of the war and terrorism team at London-based brokerage Jardine Lloyd Thompson Group P.L.C.
Still, there was no immediate rate impact or reaction from underwriters on several U.S-based risks that JLT currently is placing, and the Boston bombing losses likely will be too small to trigger coverage under the Terrorism Risk Insurance Act, she said.
Aaron Davis, managing director at Aon Risk Solutions' property practice in New York, said while the attack was relatively isolated in the affected area, it could nevertheless affect a variety of entities ranging from businesses to event sponsors to local and state governments.
The bombing's impact on the stand-alone terrorism markets could vary from the embedded terrorism insurance markets, Mr. Davis said. Stand-alone terrorism markets “are very robust — they've been tested on a global basis,” he said. But he said there is no experience with paying claims on embedded coverage backed by the federal terrorism insurance backstop.
More common coverage also is likely to come into play, said Philip J. Edmundson, president and CEO of Boston-based William Gallagher Associates Insurance Brokers Inc., which is headquartered about a mile from the site of the bombings.
He said that the area affected by the blasts is relatively small, so the impact differs from a hurricane or other major natural disaster. Nonetheless, he said he expects there will be business interruption and property damage claims.
Like other brokers and insurers with operations in Boston, Mr. Edmundson said employee safety became paramount during the mayhem that broke out after the bombings. “We shut down our office about an hour after we heard the news,” he said.