Insurers are encouraged to address this issue as it is producing growing economic losses.
Rising economic losses resulting from terrorism risk require the insurance industry’s attention. This, according to the Guy Carpenter & Co LLC reinsurance broker, which recently released a report on the topic.
The cost of terrorism is estimated to be in the hundreds of billions of dollars worldwide.
For example, from 2004 through 2016, the terrorism risk cost the European Union over $200 billion. Even the United Kingdom alone lost nearly $50 billion to the expenses associated with terrorism. The report was titled “A Maturing Market Meets an Evolving Peril, September, 2018.”
According to the report, the insurance industry will be a part of the solution to this rising issue. It stated that both the insurance and the reinsurance sectors have a critical role to play. This includes a direct role by offering consumers products that can mitigate their risk of loss. On the other hand, it also plays an indirect role by offering solutions that reduce government balance sheet risk.
The report said the industry is going to play an important role in the impact of the terrorism risk.
“It is clear our industry will play an important role in shaping the response to this threat,” said the report.
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The terrorism patterns have changed considerably since 9/11. At that time, terrorists were known for large-scale events that were devastating and exceptionally costly. That said, since then, threats have become “smaller, less sophisticated, yet no less appalling acts of terrorism.” These have occurred everywhere from the United States to France, Germany, Australia, Belgium, Spain, Indonesia and the United Kingdom.
The report explained that the nature of acts of terrorism “will continue to change as new technologies and opportunities reveal themselves to terrorist organizations.” It also underscored the rapidly growing threat of cyber terrorism as an example of a “newly developing frontier within the peril.”
The insurance industry will face a continuing challenge from the evolution of terrorism risk worldwide. “More than ever before, brokers and underwriters must use their expertise and solutions to keep insurers and citizens adequately protected. With the peril mutating rapidly, the entire insurance value chain is being challenged,” it read.