Abundant capacity and evolving risks drive shifts in terrorism insurance market: Guy Carpenter

According to a recent Global Specialties market update by Guy Carpenter, a global risk and reinsurance specialist, several significant trends have emerged in the terrorism and political violence insurance markets.

While rates in the direct terrorism market had been rising in recent years, an abundance of capacity has now led to flat pricing. Actual losses in this sector have been relatively low, contributing to this stabilisation.

However, the potential for social unrest or political instability, particularly in light of global election activity this year, is putting upward pressure on rates in certain regions.

Reinsurers are increasingly focused on how well cedants manage their portfolios, especially with regard to political violence (PV) risks.

Guy Carpenter notes that reinsurers are seeking more control over the risks entering their books, particularly for strikes, riots, and civil commotion (SRCC) and war-related exposures.

Many cedants are shifting focus away from their SRCC and war portfolios and expanding their terrorism coverage, which is perceived as less volatile.

Yet, a disconnect between event definitions in the direct and reinsurance markets, especially around SRCC hours clauses, is causing some tension.

Guy Carpenter also highlights that the absence of major treaty losses from Russia’s invasion of Ukraine contributed to slight market softening by mid-year, with some placements becoming oversubscribed. This has allowed clients to adjust their portfolios and lines.

Despite the current excess of capacity, many cedants are planning for growth in 2025, reflecting diverse strategies within the market.

Jonathan Powell, Managing Director, Non-Marine Specialty, commented: “Conversations around event definitions are likely to continue as a central theme moving forward. Cedents are keen to ensure they are getting value for money with the product they are buying in terms of event definitions – particularly if they have worked hard to de-risk their portfolio.”

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