The 9/11 terrorist attacks on the United States mainland in 2001 signalled a new level of intensity, audaciousness and geographical reach from those who seem dedicated to causing indiscriminate death and destruction. Since the 9/11 attacks, the terrorism market has evolved significantly. Before 9/11, the market for stand-alone terrorism cover was very small, with roughly five Lloyd’s-based insurers offering terrorism cover as an extension in their property policies.
Fast forward 16 years and the market has grown to about 60 (re)insurers offering significant capacity to the market – justifiably so. Recent years have seen an increase in major terrorism events across the world, as attacks in Barcelona, Brussels, London, Madrid, Nigeria, Paris, Tunisia and Turkey have highlighted the growing need for terrorism and political violence cover. In this volatile environment, it is important to understand the threat and protect the financial well-being and viability of your business. The main challenge for risk managers currently is how to prepare companies for an increasingly threatening world in which terrorism and political violence are very real and changing threats.
The market response
As a result of these changes, there is much greater interest across Africa and Europe for terrorism cover and rapidly rising appetite for broader political violence protection – particularly as the impact of globalisation means businesses have increased exposures in countries not recently regarded as particularly high risk. A large number of clients who opt for wide political violence coverage come from the extractive and associated service companies, construction and engineering contractors, especially in project finance, as well as banks and the financial sector.
There is also growing interest from other businesses, and also from smaller companies, who can often least afford to lose business, particularly as the risk to property in CBDs increases and so too the risk of business interruption. In many cases, companies may have a very small property loss but, because the whole business district has been shut down, the business interruption can be far higher than the property damage.
Read more: A (cyber) reign of terror