The emergence of new terror-related risks continues to drive an increasingly complex and diverse terror risk landscape, adding pressure to insurers and reinsurers to develop new solutions and adopt new approaches to tackle the threat, according to insurance and reinsurance broker JLT.
JLT has launched a new Viewpoint Report, which explores the ever-changing terror risk landscape and the reaction of insurers and reinsurers in the marketplace. Ultimately, JLT’s report claims that progress has been made in the terror re/insurance sector, but stresses that more needs to be done.
The report shows how existing threats from terrorist groups to launch major attacks around the world is combining with the emergence of new terror-related threats around impacts on people, loss of attraction, cyber, and toxic agents, creating a complex and diverse terror risk environment.
Driven by advances in technology and globalisation, cyber-related terror threats are becoming more and more of a concern for businesses, and JLT explained how this essentially increases the array of potential terrorist attack vectors.
Raj Rana, Head of War and Terrorism at JLT Specialty, explained that as the risk landscape has evolved property damage is no longer necessarily the main loss driver, which is exposing the limitations of traditional terrorism solutions.
“As our report shows, a number of specialty insurers have responded robustly to buyers’ calls for wider cover with an impressive array of new products being launched in the last two to three years, including threat, loss of attraction, active shooter, malicious attacks and cyber,” said Rana.
Stephen Hudson, Senior Terrorism Consultant at JLT Re, expanded on this point: “The progress made to date by the primary market represents a major step forward in narrowing terrorism protection gaps. As the ground swell for such cover grows, pressure is building on the terrorism reinsurance market to provide new solutions for the more dynamic primary carriers. This is compelling reinsurers to broaden risk appetites and adopt new approaches to account for the complexities that the new threat landscape brings.
“The role risk advisers play in developing sophisticated modelling and analytics tools, and communicating their results to risk carriers, will be crucial in bringing about this change. Broad cohesive cover supported in depth by the market will achieve greater resilience for insureds, the market and the wider economy.”
The broker calls for the availability of greater capacity for new forms of protection in the standalone market, adding that this is fairly modest when compared to more conventional terrorism risks.
Furthermore, JLT calls for greater awareness of the new coverages outside of sophisticated buyers that are familiar with the workings and complexities of the insurance and reinsurance world, underlining the importance of marketing and distribution to better target certain entities, such as small and medium-sized enterprises.
The report also notes the importance of state terrorism risk pools, which it says can be crucial in growing awareness and accessibility given their scale and market influence.
The terrorism landscape provides insurers and reinsurers with both a great challenge and opportunity, and as the risk environment continues to evolve re/insurers will need to innovate and develop solutions that meet the needs of an ever-changing industry.
