Insurers balancing risk portfolios with terrorism insurance

A leading terrorism underwriter at Lloyd’s says the market is becoming increasingly competitive as more insurers look to balance their risk portfolio in the wake of the US hurricane season.
Stephen Ashwell, a war terrorism and political violence underwriter with Hiscox, says insurers with big natural catastrophe and earthquake cover are looking to terrorism as a new area to underwrite, because it broadens their risks classes and is a significantly different type of risk to the natural catastrophe business.
“In terms of demand, we tend to find that following a significant event such as the attacks on London last year there is a four to six week period [in which] there is a significant increase in the number of enquiries and then the demand levels off,” Ashwell says in an article posted on Lloyd’s Web site.
“People tend to look at terrorism in terms of isolated and significant attacks but if you take a global view there is a terrorist incident every day of the week. However they will vary. The issues in terms of terrorism in say, Colombia, are vastly different to those in Iraq, the U.K. and the U.S.”
Ashwell says that with terrorism insurance, the key is to understand the risks that you are underwriting. “My advice to clients has long been to look at the levels of security and risk management you have in place,” he says. “When you have addressed the security of your staff and your premises you can then buy the adequate cover from the market.”
On the whole, “the rating environment for terrorism is quite flat,” Ashcroft says. He goes on to note, however, that when insurgents who have been trained and are operating in places such as Iraq return to their homes, there is a likelihood they will seek to continue their activities. “The fact remains that the actions of these insurgents can act as a motivator for other disaffected members of the community,” he says.