Demand for stand-alone terrorism coverage down

Reinsurers would like to place more terrorism business, but the demand for stand-alone terrorism coverage is on the wane, according to a report released by New York-based Guy Carpenter & Co. LLC last Wednesday.

According to Terrorism — Reinsurers Standing By, 83 perecnt of the reinsurers that responded to an informal Guy Carpenter survey in September said they “are actively seeking new or expanded terrorism transactions.” The survey found, however, that demand for standalone coverage is continuing to drop.

Other priorities for the reinsurance budget and the passage of time since the last major terrorist strike were cited in the report as possible reasons for the drop off.

“Neither the overall conclusion nor the suggested potential drivers were a surprise as they generally align with our perspective,” states the report. The report added, though, that “we believe this perspective emanates more from the U.S. market than the global market.”

Mark A. Hofmann writes that the report also cited a finding it called “somewhat surprising”: the availability of coverage for nuclear, biological, chemical and radiological exposures through about two-thirds of the markets, with roughly one-third of the markets considering pandemic covers.

“The fact that two-thirds of reinsurers will write the coverage today shows a true evolution in underwriting appetite, but ultimately the question of securing NBCR capacity hinges not just on the availability of capacity but also a question of price,” said the report.

The report said the market could tighten if the Obama administration proceeds with its plan to scale back the federal government’s terrorism insurance backstop, which has been in place since 2002. The program is slated to expire in 2014 unless it is renewed by Congress.