Terrorism insurance priorities have expanded from property physical damage and business interruption to include people risk, according to AGCS.
Speaking to Reactions at this week’s AIRMIC event for UK corporate insurance buyers and sellers, Srdjan Todorovic, AGCS’s head of terrorism for its London regional unit, discussed the evolving terror threat.
“So the trend is towards is death and injury,” he told Reactions at the event, which is being held in Harrogate, a leafy spa town in North Yorkshire, England.
“We’ve seen that in the Paris, Brussels and San Bernardino attacks, where there were higher business interruption losses versus damage to property,” said Todorovic.
While such attacks are harder to detect and easier to organise, there doesn’t actually need to be a blast to trigger a claim, he stressed.
“It doesn’t have to be an event. It might be just a threat,” said Todorovic.
For example, in May Manchester United’s final football match of the English Premier League 2015/16 season was postponed§ due to a bomb scare at the soccer club’s Old Trafford stadium.
Covers for the costs of such false alarms are being built into sub-limits, he suggests.
“In terrorism liability, we are also seeing more affirmative covers being sought,” says Todorovic. “Such products exist, but have not usually been purchased.”
He also suggested that while claims may be possible within existing general liability policies, the first instances of claims will lead to exclusions being created for the risk next time around.
“There’ve been more enquiries than expected, with sub-limits being purchased built into existing policies,” Todorovic said.
He noted the threat of cyber terrorism, citing the potential for a power company to be attacked, leading to a reactor being made to overheat, creating a physical damage explosion which could be claimed upon as a terrorist event.
However, at AGCS as among most of its peers, he noted that cyber covers and terrorism insurance remain separate products.
“Cyber and terrorism are not coordinated at the moment. The will to cooperate is there. However, product development is difficult, as people are busy with the day to day,” said Todorovic.
Housed within the liability part of the company, what AGCS internally calls “hostile environment solutions” is split into three sections: product recall; kidnap and ransom; and terrorism and political violence.
For broader political risk covers, Allianz has its Euler Hermes business, the world's largest trade credit insurer.
The insurer’s terrorism covers come with limits set at €50-100m maximum per risk insured, depending on the particular perils.
AGCS has been offering terrorism covers for just over a year, starting underwriting the business from April 2015.
The firm has been offering covers to existing corporate clients, which has created a geographically diverse book compared to some rivals focused more on specific regions, such as the Middle East and Africa.
“You’ve got to take risks, but there’s not the pressure to go in gung ho