Demand is growing dramatically for insurance that covers deadly weapons in the workplace, following the worst year in history in terms of the number of mass shootings in the United States.
There were 417 mass shootings in 2019, making it the worst year on record for this type of attack, according to the Gun Violence Archive. It presents companies and organizations with a difficult reality.
"We've seen enormous increases not only in the numbers of inquiries we've received, but in the amount of the number of policies we've actually bound," said Christopher Parker, who heads underwriting for terrorism, kidnap and ransom lines at specialty insurer Beazley.
The company, which began underwriting for deadly weapons coverage in 2017, saw the number of policies grow by 235% in 2018 and by 270% in 2019, according to Parker. He expects demand to continue as awareness for the product builds.
The demand for active shooter policies is similar to the growth trend in cyber insurance, said Paul Marshall, founder and managing director of active shooter and workplace violence insurance at McGowan, which places policies for Beazley in the U.S. "In August we placed 220 new policies for that one month. That is a rapid growth."
Companies are recognizing the need to provide monetary aid and other services to victims immediately following an incident, as opposed to waiting for a potentially drawn-out lawsuit and settlement process, he added.
Parker said the increased costs associated with providing a rapid response and comprehensive support pay off with fewer claims and less litigation.
Sometimes lawsuits are inevitable, though.
In October 2017, a gunman opened fire on a country music concert from a Mandalay Bay hotel room in Las Vegas. Fifty-eight people were killed, and hundreds more were hurt. MGM Resorts International to settle the case for as much as $800 million.
Multiple insurers, including some of the nation's largest publicly held companies, will pick up $751 million of the payout — the maximum dollar amount MGM was covered for under its general liability policies.
It's not only large corporations that are vulnerable to incidents involving deadly violence. Brokers issuing this type of policy say they're seeing requests from businesses of all sizes — municipalities, event and parade organizers, churches and schools.
"It's horrific damage if students are injured or killed. We would need help," said Dianne Howard, director of risk and benefits management for Palm Beach County Schools in Florida. The district purchased its active shooter policy in 2017.
In 2018, the county was forced to use its coverage after a shooting in a parking lot outside a football game injured two people. That shooting came just a few months after 17 people were killed in neighboring Broward County following a mass shooting at Marjory Stoneman Douglas High School in Parkland.
The proximity to Parkland as well as the timing brought intense media attention to the incident, which the district's insurer and its specific policy helped to address, Howard said.
"It's very public and you need to get in front of the press. It could involve students or parents who don't think their kids are safe," she said. "Part of the value of this type of insurance is that they provide companies to help you with that."
As with any policy, insurers look to limit their risk of seeing a claim by providing services not only after an incident, but preventative ones as well, sending in risk management companies to assess a location's vulnerabilities and make suggestions in an effort to beef up their security protocols.
Beazley contracts with a company called CrisisRisk, which sends out a questionnaire to clients when they buy a deadly weapons policy.
Founder and CEO Harry Rhulen says the questionnaire replies are ranked on a scale of 1 to 100, with higher numbers representing a better result. The highest any company has ranked is 87 — no company has ever gotten a perfect score. One company scored a 4.
"Every organization has 10% to 20% of employees with spousal, financial, drug or other problems they bring to work with them every day," Rhulen told CNBC. "Most of those people will never act out. They'll sit on the fence. But every day, one of those people gets pushed off the fence."
Rhulen advises businesses to acknowledge they have vulnerability and little control and to commit to an annual review of their plans, processes and procedures.
"General liability insurance doesn't respond to this threat," Rhulen says. Deadly weapon or active shooter policies kick in the second a weapon is brandished.
"Nobody likes to do it or even acknowledge it," Rhulen admits. But he joins other crisis experts and insurers in insisting that the sooner businesses plan for the unthinkable, the better prepared they are to prevent or respond to violence.