A combination of increased capacity, more predictable premium rates and innovative programme design is creating steady growth in the take up of stand-alone terrorism insurance...
The demand for stand-alone terrorism insurance is on the rise.
A combination of increased capacity, more predictable premium rates and innovative programme design is creating steady growth in the take up of stand-alone terrorism insurance, says new research from Aon.
According to the report, the ongoing bombardment of television images from Iraq, intelligence about foiled attacks and frequent evidence emerging about the intentions and ongoing capabilities of Islamic terrorists has increased awareness among buyers and further fuelled demand.
Will Farmer, a director in Aon's crisis management division and author of the report, said there would be little let up on demand: “While most buyers would prefer their property ‘all risks' insurers to cover full terrorism and only to use the stand-alone terrorism market as a last resort, the reticence of property insurers to soften their position while the threat of more catastrophic terrorism losses remain means that the stand-alone market will continue to have an important role to play in providing cover for terrorism.”
Extra capacity has been attracted by the market's current favourable premium-to-claims loss ratio. Overall capacity has increased by around 20% since January 2006 to around US$1.5bn and for many risks there is a surplus, creating a softer market with rate reductions of 10-20% being typical. Overall, rates have declined by around 50-60% since 2002. However, certain areas remain terrorism capacity hotspots. In some parts of New York (midtown and downtown Manhattan) and Brussels, for example, it is difficult to obtain cover at acceptable prices for new risks.
