Insurers and risk managers need a standard definition of terrorism if they are to fully overcome the business
upset caused by 11 September, Airmic and the Association of
British Insurers (ABI) have said.
The organisations were speaking at the Airmic conference after Professor Frank Furedi introduced his Lloyd's and Airmic-sponsored research on 11 September and its
effects on world business. Furedi's research was carried out at research charity Global Futures.
It showed the belief that "intentional risks" such as terrorism were uninsurable was creating a dangerously
risk-averse culture. "The spectre of intentional risks has led to ambivalence about ambition and fear of sophistication," his research report says.
"Aspects of society that have previously been seen as positive, such as prestigious buildings, feats of civil engineering, vibrant business centres, advanced computer
networks and modern transport, are now regarded as potential
targets for terrorists."
Furedi said many insurers, reacting to this climate, had encouraged a widening of the definition of terrorism
and refused to cover some risks, giving the impression that the risk of terrorism was unmanageable.
Instead of such "knee jerk reactions", he said the insurance industry needed to keep its nerve and "learn what can be covered and what is beyond the capacity of any
one industry".
Incoming Airmic chairman David Ireland and ABI general insurance manager John Parker said that to do this, the
industry needed a standard definition of terrorism.
"Some of the exclusions which are proposed by the reinsurers go beyond any reasonable definition of terrorism," Ireland said.
Furedi agreed, saying the problem was particularly extreme in the US. "Some of the American definitions say an act of grievous bodily harm is an act of terrorism," he said.
Parker said a definition was more likely to be set as more capacity came into the market and there was greater preparedness on the part of insurers and reinsurers to discuss the issue.
He said talks between the insurance industry and the Treasury on the extension of Pool Re were also progressing well, despite missing the March deadline to announce a decision. "It's been quite productive and we're making
progress," he said.
