The rise in political instability and civil unrest across the globe, including uprisings in the Middle East and protests in Greece and Spain, have highlighted the need for tailored terrorism and political violence protection, according to Guy Carpenter.
In a new report on the terror reinsurance market, the broker highlights the increasingly diverse and dispersed nature of global terror threats, which are shifting to softer targets with attacks and plots becoming more localised
According to the firm, around $2.5 billion of capacity for terrorism and sabotage coverage is currently available in the facultative reinsurance market.
However, despite an abundance of capacity, the study finds that changes to capacity and pricing can be expected, primarily at the local level.
It also warns that terrorism coverage is often incorrectly believed to cover all violent human acts resulting in property and business interruption losses.
In fact, these events must meet specific definitions of an “act of terrorism,” which may vary across markets, for coverage to apply.
The industry is therefore seeing a renewed global interest in political violence coverage, which provides comprehensive protection regardless of how an event is defined.
Guy Carpenter’s global head of business intelligence, David Flandro, comments: “Unlike some other perils, the human element inherent to terrorism risk makes it an unpredictable and challenging risk to quantify and manage.”