The recent deadly terror attacks in Paris, Nice and Brussels have underscored the importance of having business interruption insurance, according to a new study from PwC.
In its review of pricing conditions in the London market, PwC said there has been a marked change in the types of terrorism events, as evidenced by recent activity across Europe.
The firm said this has led to “material uncertainty” for re/insurers over the frequency of losses, with implications for the ongoing suitability of current pricing and catastrophe models.
“This increased uncertainty further highlights the need for adequate business interruption insurance cover, albeit the changing nature of terrorism risk does require insurance products to adapt to deliver the desired protection to society,” PwC said.
According to the Lloyd’s City Risk Index, a combined £98.2 billion of global gross domestic product (GDP) is at risk from terrorism between 2015 and 2025.
Based on the index, £294bn of global GDP is also at risk from cyber-attacks, but majority of corporates are still under-insured on both risks across the globe.
“Given this backdrop, terrorism premiums have grown over the past four years, fuelled by more than a doubling of premiums from a variety of delegated underwriting sources such as broker facilities, binding authorities and where (re)insurers chose to follow another lead underwriter,” the PwC research said.
PwC added that the increase in terrorism premiums has been outstripped by the growth in exposures.
Europe terror attacks to increase insurance demand
The revenue stream brokers are missing
Insurer’s acquisition put on hold