Guy Carp Publishes Global Terror Insurance Market Study

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Guy Carpenter & Company, the global risk and reinsurance specialist of the Marsh & McLennan Companies, has published a new study on the “Global Terror Insurance Market.” It contains information from “six continents and 34 countries,” said the announcement, and “provides a detailed overview of the state of terror insurance cover globally, highlighting recent developments in the United States, Belgium, France and the Netherlands, as well as emerging issues in the aviation market.”

“With private insurers increasingly excluding terror coverage from their contracts, governments are becoming more involved in mitigating the risk exposure of insurance and reinsurance companies,” stated Sean Mooney, Chief Economist at Guy Carpenter.

Among the report’s other key areas of focus are the following:
— Availability and affordability of coverage: In the United States, terrorism risk insurance has improved, becoming more affordable since the terrorist attacks of September 11, 2001. Despite increases in risk retentions under TRIA (the Terrorism Risk Insurance Act of 2002), insurers have allocated additional capacity to terrorism risk, prices have declined and take-up (purchase) rates have increased. These improvements have been driven by a number of factors, including better risk measurement/management, the improved modeling of terrorism risk, greater reinsurance capacity and a recovery in the financial health of property and casualty insurers.
— Group life policies: Coverage for terrorism risk insurance in group life insurance policies has remained generally available, and prices have declined, even though group life insurance is not part of TRIA. Given these market signals, there is no reason to expect negative developments in the group life insurance market.
— Chemical, nuclear, biological and radiological risks: There remains little cover for these risks. This has less to do with terrorism specifically than with the nature, scale and uncertainty of the damage and losses from these events.
— New Belgian terror coverage program: Belgium is expected to introduce a program for terror cover in 2008, with an upper limit of €1 billion [$1.335 billion].
— Changes in France: In France, a number of adjustments were made to the GAREAT program, including the addition of €200 million [$267 million] in capacity to the Large Risks Scheme, and the extension of the Unlimited State Guarantee to 2009.
— The Netherlands: The number of participating companies in the Netherlands terror pool has decreased slightly, primarily as a result of mergers and takeovers.
— Aviation market developments: Losses to hulls, passengers and third parties arising from weapons of mass destruction (WMD) have emerged as a major issue, as debate continues about whether they should be classified as government or commercial market risks.