Alternative capital not used for terrorism risk: Guy Carp

The influx of alternative capital into the US property catastrophe reinsurance market is not being widely deployed into terrorism risk.

This is according to Guy Carpenter, which added that the lack of deployment is being driven by low confidence in the probability component of terrorism models, the tail risk/payout patterns for workers compensation and the possible correlation of a downturn in the equity/investment market to a large-scale terrorism event.

Guy Carpenter added that even if the “Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) is renewed without wholesale changes, the recent organic growth in US nationwide workers compensation premiums as a result of rate rises and payroll growth is likely to cause insurance companies’ deductibles to increase. This in turn is likely to increase demand for terrorism reinsurance.”

The broker said that it has been exploring additional coverages for terrorism protection over the last couple of years.