Tony Gallagher, Regional CEO for Asia Pacific at Guy Carpenter, the global reinsurance broking business and part of Marsh, has set out a detailed case for the central role of reinsurance, retrocession and terrorism pools in supporting market capacity amid a rapidly shifting threat landscape.
Speaking at the global forum for terrorism risk pools and their stakeholders, Gallagher framed his remarks around the idea that disruption has always been a constant.
Reflecting on Sydney’s history, he pointed to both its colonial past and more recent economic transformation, before turning to the present day. He described the current environment as one of “profound change, risk and dislocation,” echoing the World Economic Forum’s characterisation of a “polycrisis” where multiple risks compound.
Within that context, Gallagher said terrorism continues to evolve in both form and impact. “We know that in such stress, bad faith actors, motivated by grievance, lash out against the world. Their tool is terror,” he said.
Referencing incidents from Sydney and beyond, he noted that while terrorism is not new, its manifestation is changing, with actors increasingly blending into organised criminal networks to enhance “their resilience, financial resources, and operational reach.”
Gallagher drew on analysis from Guy Carpenter and Marsh’s latest terrorism risk research to trace the evolution of threat actors from hierarchical organisations in the 1990s to “digitally connected cells in the 2000s,” then “dispersed ideological networks in the 2010s,” and now “interlinked state and non state actors.”
At the same time, he said, the nature of attacks has shifted from large scale property damage to incidents focused on people, with “increased frequency, more moderate severity, and a wider array of variation in targets, weapons, and tactics.”
Motivations, he added, now range widely, from religious and political drivers to “nihilistic fury,” while the tools available to attackers have expanded to include cyber capabilities, artificial intelligence, drones and encrypted communications. Gallagher warned that cyber attacks in particular will increasingly move beyond data breaches towards the disruption of critical infrastructure, affecting “transport, health, electricity, water, banking or any of the systems we depend on.”
For the reinsurance sector, this creates a far more complex and interconnected risk environment. Gallagher said reinsurers must now navigate “an increasingly complex risk landscape where traditional models must evolve to capture new threat vectors,” including cyber terrorism, political violence and chemical, biological, radiological and nuclear risks.
Against this backdrop, he positioned reinsurance as a key component of societal resilience. “We are part of the antidote to terror,” Gallagher said, arguing that the sector’s role is not only financial but structural. “Our work in reinsurance is about the economic systems and structures that help individuals, businesses and communities bounce back,” he said, pointing to both the immediate and longer term economic consequences of attacks.
Gallagher linked this directly to the legacy of the September 11 attacks, which he described as a defining moment for the industry. He noted that the event reshaped the understanding of terrorism risk and led to the creation of public private solutions such as the Terrorism Risk Insurance Act, which established a federal reinsurance backstop in the United States. This, he said, demonstrated how governments and industry can work together to “stabilise markets and protect economies.”
A central focus of Gallagher’s address was the development and ongoing importance of terrorism reinsurance pools. Reflecting on their origins, he said they emerged from the recognition of a “market failure or protection gap,” when private insurance capacity alone proved insufficient to meet demand. Over time, however, their role has expanded significantly.
“What began as a response to a specific shock has become a dynamic platform for managing an ever changing risk landscape,” Gallagher said. He highlighted how many pools have broadened their scope to include not only traditional terrorism risks but also chemical, biological, radiological and nuclear threats, alongside business interruption and cyber terrorism.
He pointed in particular to recent legislative changes in Australia to include state sponsored terrorism within the pool’s remit, noting that this “matters enormously in a world where the line between a rogue individual and a hostile state actor is increasingly hard to draw.” This clarity, he added, helps provide policyholders with appropriate protection while allowing insurers to innovate around defined coverage boundaries.
Gallagher also stressed the scale of capacity that pools bring to the market. He noted that traditional terrorism treaty reinsurance capacity is around USD 4 billion for a programme, compared with USD 100 billion available through TRIA and more than USD 10 billion provided by Australia’s pool. This disparity underlines, in his words, “the importance of the pools in providing terrorism capacity to support the community and business.”
He reinforced this point by referencing the scale of past losses, noting that the World Trade Center attack remains the costliest terrorism event in history, with losses exceeding USD 40 billion at the time and significantly more in today’s terms.
A key technical theme running through Gallagher’s speech was the importance of retrocession in underpinning these structures. “Central to this evolution is the importance of retrocession protection,” he said. “By securing appropriate retrocession, pools can manage peak exposures, protect their balance sheets and maintain the reinsurance market to support terrorism.”
Without access to sufficient retrocession, Gallagher warned, the ability of pools to absorb large losses and provide consistent capacity would be “significantly diminished.” He added that this layer is becoming even more important given the current geopolitical environment and the potential for more systemic and correlated losses.
Gallagher also explored how terrorism pools are evolving to meet future challenges. He pointed to increasing interest in alternative risk transfer solutions, including parametric products, as well as growing investment in data analytics and probabilistic modelling to support more accurate pricing and risk assessment. These advances, he said, are helping to facilitate investor confidence and broaden the sources of capital available to the market.
He highlighted the role of capital markets through the issuance of catastrophe bonds, citing examples such as the UK’s Pool Re and France’s GAREAT. These transactions, he said, are bringing new investors into the terrorism risk space and “putting more distance between the taxpayer and potential loss.”
In addition, Gallagher noted that some pools are investing in risk reduction initiatives, including partnerships with governments to enhance counter terrorism capabilities and encourage businesses to adopt protective security measures. He also pointed to the expansion of cyber terrorism coverage as a reflection of the growing importance of digital threats alongside physical attacks.
Looking ahead, Gallagher cautioned that any reduction in government support for terrorism pools would need to be carefully managed. Any material change, he said, should be gradual and clearly signalled to the market to avoid disruption and ensure that adequate capacity remains available.
He concluded by emphasising that terrorism risk remains inherently systemic and requires sustained collaboration across the public and private sectors. IFTRIP, he said, plays a vital role in facilitating that collaboration, providing a forum where pools, policymakers and industry participants can share insights and develop coordinated responses.
Ultimately, Gallagher’s message was that terrorism reinsurance pools, supported by strong retrocession and public private partnerships, are not simply mechanisms of last resort. They are, as he put it, “proven strategic tools” that enable markets to function, support economic resilience and ensure that protection remains available in an increasingly uncertain world.
