Canada: Does Canada Need A Terrorism Risk Insurance Scheme?

Last Updated: December 7 2015
Article by Carol Lyons


In October 2014 two allegedly Islamic State-inspired Canadians killed two members of the Canadian forces in separate incidents in Saint-Jean-sur-Richelieu, Quebec and Ottawa, Ontario. One of the individuals, an armed assailant, subsequently stormed the Canadian federal Parliament Buildings before being shot dead.

In AON's annual Terrorism and Political Violence Risk Map and related guide for 2015, Canada (and eight other western countries) were rated at 'increased risk'. Nevertheless, Canada's country risk level was rated 'low'. France's country risk level was rated as 'medium' by the same publication. Presumably, the recent horrific attacks in Paris, Mali and elsewhere will have a further effect on the perceived level of terrorism risk in Europe and various other countries, including perhaps Canada. However, it is not yet clear whether there may be a spillover effect on the pricing/availability of terrorism risk insurance in Canada and, if so, whether Canada's need for a government-backed terrorism insurance scheme might be revisited.


The genesis of the modern public-private terrorism risk insurance schemes traces back to the events of September 11 2001 in the United States. These attacks cost the insurance industry an estimated US$40 billion, much of which was borne by reinsurers. In the aftermath, many reinsurers subsequently withdrew from providing coverage for terrorism risk. The primary market was generally forced to follow suit and, where permitted, excluded coverage for losses arising from terrorism, since it had no corresponding reinsurance coverage. As a result, many businesses were faced with the prospect of no coverage for future terrorism events. Industries that were potentially vulnerable to 9/11-style terrorist attacks (eg, real estate, construction, energy and transportation) were seriously threatened because investors and lenders required protection for their investments, including insurance that would cover the risk of significant losses, such as those due to a similar terrorist event. In the wake of these events, US Congress stepped in to provide a government-backed terrorism insurance program.

Government schemes

Today, a number of countries have government-mandated or backed insurance schemes for property damage and business interruption occurring as a result of terrorism. After the 9/11 attacks, many of these schemes were either newly created or their form or the scope of coverage was revised.

The US government enacted the Terrorism Risk Insurance Act (TRIA) in 2002. TRIA created a temporary federal program that provided for a system of shared public and private compensation for certain losses occurring as a result of a certified "act of terror". TRIA provides for a government reinsurance backstop in the event of large-scale terrorist attacks. Under TRIA, participating insurers must provide terrorism coverage for the types of insurance included in the statute. The program has been extended a number of times. Most recently, new legislation was enacted in 2015 which amended the expiration date to December 31 2020. Under the program, the federal government will cover each insurer's losses above a certain threshold and the government may levy surcharges to recoup its outlay. Payments by the government under the program have yet to be invoked, despite the Boston Marathon bombing in April 2013.

In France, Gestion de l'assurance et de la Réassurance des Risques Attentats et actes de Terrorisme (GAREAT) was established after 9/11 to cover large-scale property damage and business interruption losses arising out of terrorist attacks occurring on national territory. GAREAT's members are French or foreign insurers that issue policies covering risks situated on French territory. Caisse Centrale de Réassurance, the French state-owned reinsurance company that also covers losses due to natural catastrophes, provides reinsurance coverage (guaranteed by the French government) to GAREAT members.

In the United Kingdom, Pool Reinsurance Company (Pool Re) was formed in the early 1990s to address terrorist acts arising out of events in Northern Ireland. Pool Re was set up as a mutual reinsurer by the insurance industry and the UK government, and its members comprise insurers and Lloyd's syndicates offering commercial property insurance. Members of Pool Re provide cover for terrorism-related losses up to the organization's reserves fund. Following 9/11, Pool Re's cover was extended to 'all risks' (as opposed to only fire or explosion) and various exclusions (eg, biological or nuclear attack) were removed. The UK government provides an indemnity of up to 100% of claims above the value of the fund.

Canadian approach

In Canada, there is no similar public-private terrorism insurance scheme; nor to date has there been any serious groundswell advocating for one. Soon after 9/11, while other countries were putting new terrorism insurance schemes in place or revising existing schemes, the topic was considered by the industry and the Canadian government, but no action was taken.

Although insurers in Canada implemented terrorism exclusions after 9/11, as did their counterparts in the United States, reductions in coverage and escalation of pricing did not cause the same extent of market disruption. This may have been due in part to the fact that primary insurers in Canada continued to cover 'fire following' – potentially a large source of losses following a terrorist attack – in Canadian jurisdictions where regulatory approval was required before an insurer could cease providing the cover, and local reinsurers were willing (although not required by regulation) to provide reinsurance for that coverage. As cited in a Canadian Underwriter article in January 2002,1 the Canadian banking sector did not formally lobby the federal government to provide a scheme affording protection for terrorism risks, apparently because of confidence in its ability to apply risk diversification methods based on the size of the banks' lending and investment portfolios. In fact, a director of the Canadian Banking Association (CBA) indicated that the CBA did not expect that a lack of terrorism risk cover would cause significant disruption to the Canadian lending market, and this appears to have proven to be true.

The Canadian Underwriter later covered a speech made in 2007 by Lord Levene, then chairman of Lloyd's of London, to insurance industry and financial services representatives in Toronto, Ontario.2 In his speech, Lord Levene suggested that Canada needs a formal, public-private, risk sharing pool to provide businesses with coverage against the risk of terrorist attacks. He noted that Canada is noticeably alone amongst the world's leading western nations in not having a terrorism pool in place.

Nevertheless, a few years later, an article in Top Broker in February 20153 concluded that to date, neither the marketplace nor the Canadian government has felt the need for a specific terrorism insurance scheme, despite the two events that occurred in Saint Jean-sur-Richelieu, Quebec and Ottawa in October 2014. Nor does it appear that the Canadian banks have developed any plans to lobby the federal government to provide protection against terrorism risk.

At present, terrorism risk coverage is generally available in Canada and a number of large, sophisticated brokerages are actively marketing the product. In addition, certain political risk insurance (including insurance covering terrorism) is available to Canadian businesses through Export Development Canada (the crown corporation that supports and develops Canada's export trade). Whether the availability of this coverage will be affected as terrorism risk escalates in the world remains to be seen. The fact that the recent Paris attacks were perpetrated against 'soft' targets may or may not figure in to the appetite for insurers in Canada to underwrite terrorism risk coverage. If availability of appropriate coverage for a reasonable price is materially affected, there may be renewed interest in a terrorist risk insurance scheme in Canada.


1 See

2 See

3 See

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2015

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Carol Lyons
In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions