Terrorism Insurance

When I posted recently about entrepeneural initiative moving outside the U.S., this wasn’t quite what I had in mind:

He walked into the offices of the Iraq Insurance Company and bought a terrorism insurance policy. It looked like an ordinary life insurance policy, but with a one-page rider adding coverage for "the following dangers: 1) explosions caused by weapons of war and car bombs; 2) assassinations; 3) terrorist attacks."

New Business Blooms in Iraq: Terror Insurance By ROBERT F. WORTH, New York Times, Published: March 21, 2006

It seems that ordinary life insurance policies don’t cover such deaths, because the state used to, or people turned to their family or tribe. But now the state doesn’t, and the problem is too big for tribe or family. Enter the entrepeneur.

The entrepeneur in this case is the state, which is a bit unsavory: profiting from the state’s own failure to prevent terrorism.

However, the individuals running this venture found a market need and filled it.

And their method isn’t all that different from what other insurance companies do for new products. Sure, this new terrorism insurance is overpriced, but so is what little Internet business continuity insurance you can buy off the shelf.

Hm, I wonder if these guys will move from collecting payment in cash to collecting over the Internet, and in that case will they find new markets in other countries, for example Palestine? Or New York City?


PS: Thanks to Adam Shostack for pointing this one out.