Strong Demand


Demand for terrorism insurance remains high, fueled largely by lender requirements, while political risk insurance sputtered following a brief spike in interest during the Arab Spring.


“There’s abundant supply of capacity in the market for it.” Erik Nikodem, Lexington Insurance


The strong demand for terrorism insurance seems driven less by a real concern about terrorism risk than by lender requirements and corporate governance best practices. Some insurers and brokers may have tended to be somewhat complacent because of the lack of a recent high-impact event in the United States. But in actuality, it does not appear that the risk is, in fact, lower. With capacity abundant, rates for most occupancies are flat to declining, but in recent months, prices for high-profile targets have increased. As of now, the spike in demand for political risk insurance that followed on the heels of the Arab Spring appears to have subsided.


The Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) is scheduled to expire in 2014. If TRIPRA is not extended, it could have a significant impact on smaller insurers that offer coverage under that program and captives that are specifically designed to access its coverage. But larger insurance organizations like Chartis typically have carriers that offer broader coverage outside the confines of the federal terrorism risk insurance programs.


Copyright © 2012 by A.M. Best Company, Inc. All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.


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