29 May 2018 11:30
Photo : Freepik
The risks from terrorism are difficult to model when the time comes to establish a cover and to estimate the exposure of insurers, says Marsh in a report. The market study demonstrates that the nature of the risks of terrorism changes, so that attacks by «lone wolves» and small groups against targets more vulnerable, argues the firm.
Marsh also notes the increase in the use of vehicles as a weapon, especially in the United States, the United Kingdom, France, Germany, Spain and Switzerland. It also underlines the increasing threat of cyber attacks continues to grow.
«While the attack methods are changing, the buyers are looking to expand definitions related to terrorism in their insurance coverage to include events with an assailant assets,» adds Marsh.
Estimate the probabilities
Insurers and reinsurers can use three types of models to determine their exposure to terrorism risk, the probabilistic model, the analysis of the exposure concentration and the deterministic model, explains Marsh. This last is the most used by insurers and is based on scenarios.
This is asking insurers to constantly change and refine their business model to increase their capacity to manage the risk of terrorism quantitatively. It is more difficult for insurers to model these risks as those of natural disasters, says the firm.
A stable market
Despite a strong capacity in the market for terrorism insurance, the price could increase due to losses related to disasters by 2017, » says Marsh. The rate of reinsurance programs remained generally stable, an increase of 10 % risk-adjusted during the renewal period from January 2018.
In the United States, 62 % of businesses have purchased terrorism insurance in 2017. Organizations in education, health care, financial institutions and companies in real estate are those that exhibit the best rate of subscription.