Governments worldwide are picking up private sector slack in terrorism insurance, a new report has found.

The report by US-based reinsurance broker Guy Carpenter says the private insurance sector is wary of the uncertainty and costs involved in terrorism risk, and is steering clear of the market. Governments are filling the financial breach of a possible terrorist attack.

“With private insurers increasingly excluding terror coverage from their contracts, governments are becoming more involved in mitigating the risk exposure of insurance and reinsurance companies,” Guy Carpenter Chief Economist Sean Mooney said.

The company’s 2007 report on the availability of terrorism insurance also found terrorism risk insurance has become more affordable since the September 11 terrorist attacks.

The report found insurers are placing additional capacity in terrorism risk as prices fall and take-up increases.

“These improvements have been driven by a number of factors, including better risk measurement/management, the improved modelling of terrorism risk, greater reinsurance capacity and a recovery in the financial health of property and casualty insurers,” it said.

The report found that chemical, nuclear, biological and radiological risks are also unpopular, with little cover available in the market.