Aon Study Confirms Growth in ‘Stand-alone’ Terrorism Coverage Market

April 18, 2007

Aon UK’s new report, “Stand-alone Terrorism Market Update,” concludes that a “combination of increased capacity, more predictable premium rates and innovative program design is creating steady growth in the take up of stand-alone terrorism insurance.”

Companies also appear more interested in acquiring terrorist coverage following the “the ongoing bombardment of television images from Iraq, intelligence about foiled attacks and frequent evidence emerging about the intentions and ongoing capabilities of Islamic terrorists,” said Aon. This has “increased awareness among buyers and further fuelled demand.”

“Most existing buyers renew and there is a steady stream of new buyers of the stand-alone product,” indicated Will Farmer, a director in Aon’s Crisis Management Division and author of the report.

Aon notes that the coverage is now more generally more available due to “favorable premium-to-claims loss ratio” and the fact that “overall capacity has increased by around 20 percent since January 2006 to around $1.5 billion.” For many risks there’s actually “a surplus, creating a softer market with rate reductions of 10-20 percent being typical. Overall, rates have declined by around 50-60 percent since 2002.”

There are some notable exceptions, however. Aon said: “Certain areas remain terrorism capacity hotspots. In some parts of New York (midtown and downtown Manhattan) and Brussels, for example, it is difficult to obtain cover at acceptable prices for new risks.”

Take up of terrorism cover is also spreading geographically. Farmer noted that stand-alone insurers are now much less dependent upon US risks. “There has been a huge growth in demand for policies,” he explained. “In addition to the US we are seeing strong demand from Canada, Latin America, Eastern Europe, UK, Germany, Southern Europe, India and the Far East.”

He doesn’t anticipate a let up in the increasing demand. “While most buyers would prefer their property ‘all risks’ insurers to cover full terrorism and only to use the stand-alone terrorism market as a last resort, the reticence of property insurers to soften their position while the threat of more catastrophic terrorism losses remain means that the stand-alone market will continue to have an important role to play in providing cover for terrorism.”

For more information on the report contact Reuben Aitchison at: ; or by telephone:
+44 (0)20 7086 7201
+44 (0)7944 189 804

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