CRO Forum Position Paper on Terrorism published

Strong partnership between insurance industry and national governments needed

As important representatives of the risk community, the Chief Risk Officers of major (re)insurance companies have decided to address the challenge of terrorism within the CRO Forum’s Emerging Risks Initiative and, by communicating their view on terrorism, to enter into dialogue with major stakeholders.

The CRO Emerging Risks Initiative (ERI) was launched in 2005 to raise awareness of major emerging risks relevant to society and the (re)insurance industry. The initiative is currently chaired by Munich Re and consists of eight members representing Allianz, AXA, Munich Re, Swiss Re, Zurich Financial Services as well as Chubb, Insurance Australia Group and Royal & Sun Alliance.

Terrorism is a highly complex man-made phenomenon with repercussions for society and the economy. It has developed into a threat that knows no geographic or geopolitical boundaries. Moreover, militant and terrorist organisations have demonstrated the will to increase the magnitude of their attacks. The evolving risk profile of terrorism risk makes demands on all stakeholders. Thus, the insurance industry is actively pursuing suitable solutions to cope with the consequences of national and global terrorism.

Moreover, the time has come for governments and insurers to optimise their cooperation on how to deal effectively with the challenge of terrorism. In such risk partnerships, governments should primarily act as facilitators in order to protect the financial resilience of the insurance industry. As risk carriers of last resort, they are the only bodies capable of providing sufficient capital to insure against the most extreme terrorist attacks. And, as regulators, they ensure that adequate and coherent legislative frameworks are in place. However, no one-size-fits-all solution can be expected as terrorism insurance coverage must be tailored to the needs of each respective market.

The new CRO ERI position paper points out which characteristics make terrorism a unique challenge for the insurance industry and why managing the risk of 21st century global terrorism – notably major coordinated conventional and NBCR attacks – will require a concerted effort based on a strong partnership between the insurance industry and national governments. Furthermore, this paper contains a comprehensive overview of terrorism coverage offered in the majority of cases by property, liability, workers’ compensation, life and health insurers in the context of pool or backstop solutions in individual countries.