Question

In: Operations Management

The Sept. 11 terrorist attacks accounted for the largest insured loss in the history of the...

The Sept. 11 terrorist attacks accounted for the largest insured loss in the history of the world. The insurance companies providing commercial crime, commercial property, commercial general liability, and business income coverage were required to pay in most cases because the event was not legally considered an "act of war" or "catastrophe", which would have excluded it from coverage (see page 330). Very soon after that, every insurance policy added "act of terrorism" to excluded losses, leaving every business on its own to deal with the risk of a massive loss caused by an act of terrorism. Congress addressed that problem with the Terrorism Risk Insurance Act of 2002. The act expired in 2014 and was renewed a week later for an additional six years.

In a nutshell, TRIA allows insurers to exclude losses due to acts of terrorism from standard commercial package policies, but it also requires the insurers to offer terrorism coverage in a separate policy and provides some federal assistance paying for losses caused by terrorism. But a business has the option whether to buy the terrorism coverage and it's very expensive.

Imagine all of you together (due to your advanced understanding of risk management) make up the committee at MGM Resorts that will decide whether the company should buy any terrorism insurance and if so how much. Each of you researches TRIA a little further on your own first and then begin by stating whether you should or shouldn't buy it and why/why not.  

Solutions

Expert Solution

Casino in general are at high risk of terrorism. Casino like MGM daily entertain a large number of customers who are constantly at risk of being hurt by any terrorism act. If any usch attact occurs, and the casino endure the liability it would have to pay a huge sum as a cost of recovery.

MGM has already been targetted earlier and is constantly at risk of further terrorist acts. Thus, it has great need of protection of insurance from Federal against terrorsim acts.

Earlier before TRIA insurance companies were reluctant to offer insuranec against terrorism. This problem was solved by the enactment of this law. Without TRIA, even if MGM agreed to have insuranec against terrorism activities from an insurance company, it would have to face great cost difficulties in obtaining covergae.

Thus, MGM should buy it.


Related Solutions

Analyze the Fed’s reaction to the Sept. 11 terrorist attacks.
Analyze the Fed’s reaction to the Sept. 11 terrorist attacks.
Since 9/11, there has been a significant focus on preparedness for terrorist attacks. The response to...
Since 9/11, there has been a significant focus on preparedness for terrorist attacks. The response to Katrina highlighted significant short comings in response to the impact of natural disasters. Based upon your text and outside readings, what do you see as the improvements required to adequately respond to terrorist threats and attacks, as well as hurricanes like Katrina, earthquakes, and other natural disasters? Does preparing for one emergency assist in preparing for the other type disaster? What organizations within the...
impact of terrorist attacks on 9/11 on criminal justice agencies. include the creation of new governmenr...
impact of terrorist attacks on 9/11 on criminal justice agencies. include the creation of new governmenr department.
Discuss the similarities and differences between the Oklahoma City Bombing and 9/11 terrorist attacks. Also, examine...
Discuss the similarities and differences between the Oklahoma City Bombing and 9/11 terrorist attacks. Also, examine some of the lessons that you feel were learned from the 9/11 terrorist attacks. Finally, share your thoughts on how the lessons learned can be used in the future. This is a chance for you to combine your personal thoughts with the concepts that are covered in this unit.
There have been several incidents of terrorist attacks around the world in the media. Faith and...
There have been several incidents of terrorist attacks around the world in the media. Faith and religion do not have to cause war and terror. Discuss problems and solutions of religious beliefs in any country of your choice.
Which of the following categories of terrorist groups carried out the most lethal attacks (in terms...
Which of the following categories of terrorist groups carried out the most lethal attacks (in terms of casualties) between 1968-2005? Select one: a. Nationalist/separatist b. Religious c. Leftist ideology d. Rightist ideology
The loss for an automobile accident for cars insured by company X is uniformly distributed from...
The loss for an automobile accident for cars insured by company X is uniformly distributed from $0 to $40,000. Find the probability that in a sample of 12 such automobile accidents that no more than 2 accidents have a loss over $32,000.
1-3 What procedure is followed when the insured and the insurer disagree on the loss amount...
1-3 What procedure is followed when the insured and the insurer disagree on the loss amount under the homeowners policy? What if they disagree as to whether the loss is covered?
1. Under a crime policy, the insured must submit a sworn proof of loss within A....
1. Under a crime policy, the insured must submit a sworn proof of loss within A. 30 days B. 60 days C. 90 days D. 120 days 2. What kind of surety bond guarantees a contractor will complete a project per the specifications of the contract? A. Fidelity bond B. Supply bond C. Performance bond D. Bid bond. 3. 1. All of the following are excluded from the personal auto policy EXCEPT A. bail bonds B. damage to owned or...
11. (5.33) The toco toucan, the largest member of the toucan family, possesses the largest beak...
11. (5.33) The toco toucan, the largest member of the toucan family, possesses the largest beak relative to body size of all birds. This exaggerated feature has received various interpretations, such as being a refined adaptation for feeding. However, the large surface area may also be an important mechanism for radiating heat (and hence cooling the bird) as outdoor temperature increases. Here are data for beak heat loss, as a percent of total body heat loss, at various temperatures in...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT