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Insurers respond to changing terrorism threat

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Terrorism insurance coverage is expanding in response to evolving threats, according to a report from Marsh.

The potential for cyber-terrorist attacks, both state-sponsored and by private actors, has raised interest in cyber-terrorism coverage.

Last year’s North Korea-backed WannaCry cyber attack prompted business losses of more than $US300 million ($386.2 million), the broker’s Terrorism Risk Insurance Report says.

Insurance buyers want to expand terrorism definitions in coverage to include “active assailant” events. Hotels and casinos, sports arenas, restaurants and cinemas are the most interested, the report says.

Education groups, healthcare, financial institutions, real estate companies and hospitality and gaming have the highest take-up rates of terrorism insurance.

Pricing has increased in the non-government organisation sector and hospitality and gaming industries, which have been the target of terrorist acts in recent years. 

Marsh says more insurers are adding political violence coverage to their standard terrorism policies, as buyers seek cover against such unrest.

Insurers are also developing products offering first and third-party business interruption protection, without the need for a direct property damage trigger.

Insured losses arising from terrorism in 2016 totalled $US173 million ($222.7 million), according to figures attributed to Swiss Re.

The number of lives lost to acts of terrorism, insurgency or politically or ideologically motivated violence fell 34% last year to 122,000. The number of attacks fell by 7%.

US terrorism insurance coverage has remained stable, Marsh says.

About 62% of US companies bought coverage embedded in property policies under the Terrorism Risk Insurance Program Reauthorisation Act, which provides the world’s largest public-private terrorism risk-sharing mechanism.

Terrorism insurance capacity remains strong, tripling to $US4.3 billion ($5.54 billion) since 2005.