Research

Marketplace Realities 2018: Terrorism

November 6, 2017

    The one thing

    The terrorism insurance market continues to develop innovative products to address the changing nature of terrorism — buyers should take advantage of expanded definitions that better cover their risk exposures.
  • The political environment, both domestic and international, has remained turbulent throughout 2017. Inflamed rhetoric, many fear, increases the likelihood of political violence and terrorism.
  • Terrorist attacks in recent months have been carried out by lone wolves inspired by radical ideology who operate with less sophisticated weapons, including readily available small arms, homemade explosives and cars and trucks. As a result of changing tactics, risk transfer tactics are adapting as well.
  • An unusually destructive hurricane season has impacted Lloyds’ composite reinsurance structures, which could reverse our predicted rate decreases as the market impact is clarified
  • Responding to the increasingly destructive and disruptive nature of cyber attacks, the U.S. Department of the Treasury provided clarity in defining the scope of the Terrorism Risk Insurance Act to include property and casualty losses as a result of cyber terrorism attacks. This has fostered the expansion of captives to address these perils.
  • Price prediction

    Non-Tier 1
    -5% to Flat

    Tier-1
    Flat
  • Traditional active shooter/active assailant products are now being broadened to include all “hand-held” weapons, including explosive devices worn on the body and motor vehicles. As a result, take-up for terrorism liability products is increasing, as policies are being tailored to address both the trucking and transportation sectors.
  • Newly developed parametric products address disruptions to revenue streams caused by terrorism events by covering loss of attraction to key properties (even if not the target of the event).
  • New analytical models are being developed to measure the liability exposure following a terrorist attack.
  • With the construction sector on the rise throughout 2017, risk managers have increased their focus on the potential impact of protestor disturbances and third-party strike action without the need of a physical trigger. This has fostered the development of broader coverage of business interruption and delays in start-up.
  • Insurers have broadened the NCBR trigger to include malicious acts in addition to definitive terrorism. The overall increase of capacity within the stand-alone terrorism market is expected to bring about rate reductions in this specialist area.
Marketplace Realities 2018: Terrorism chart