Excess capacity in terrorism market at odds with landscape

The increased risk landscape is at odds with a fall in price over recent years due to a surfeit of capacity.

This is according to Willis, which issued a statement following the tragic terror attacks in Paris. It added that most French insured’s have access to the country’s highly-successful terrorism pool, GAREAT, via their property insurer. The pool is reinsured by Lloyd’s.

Andrew van den Born, executive director in Willis political and trade credit risk practice, said: “Political instability continues to rise across the globe which has resulted in a heightened awareness generally amongst risk managers and investors alike. Heartrending events such as this serve as a reminder that the threat from political violence remains high and can come from unexpected quarters as it is almost impossible to predict.

“Demand for political risk insurance – which protects against the physical damage and disruption caused by politically motivated violence – is on the increase. This is matched by an increase in capacity. In fact, a surfeit of capacity in the market has resulted in recent years in a fall in price which is at odds with the increased risk landscape.”

James Borrie, executive director in Willis’s terrorism practice, added: “So far we have not seen any increase in demand for stand-alone Terrorism insurance as a result of these attacks. Europe has been on a ‘severe’ threat level for some time now, meaning that a terrorist attack is highly likely. In the UK, the terror threat level has not yet been raised to its most serious – ‘critical’.

“Commercial insurance buyers in Europe have been aware of the threat posed by international and home-grown terrorists for some time and have made insurance purchasing decisions based on that. Meanwhile, there is excess capacity in the insurance markets which will prevent premiums for Terrorism insurance increasing, at least in the short term.”