Terrorism : an analysis of the implications on the insurance industry

Abstract

One of the main matters headlining news in the last couple of years has been on various occasions related to terrorism, or a threat thereof. Insurance is one way of dealing with the consequences of such catastrophes, and at least reduce the burden which terrorist attacks leave behind. This dissertation will critically analyse the current situation of terrorism worldwide, the effects of previous terrorist attacks on the insurance industry and the relevance of introducing a specialized terrorism market, focused solely on terrorism policies as standalone policies rather than as an extension. Literature was conducted on already existing material to gather an understanding of what is already present in the industry. In addition, a questionnaire was conducted to local insurance entities and international reinsurance to garner a global perspective of the industry’s perception on terrorism risk. Furthermore, a critical analysis was carried out on the 9/11 attacks to apprehend the repercussions terrorist attacks have had on the industry. Some of the findings uncovered from this dissertation are that terrorism is on the increase on a global level but so is demand for terrorism insurance. Even though a terrorism market does exist in some countries, various others do not offer any cover. Markets which offer terrorism cover are not moving as rapidly as the evolution of terrorism is, thus an area of growth has been identified. In conclusion, this study has identified a gap in the market which could be portrayed as an opportunity for development of new products to cater for the clients’ ever growing requirements.