Terrorism Risk Coverage
نویسندگان
چکیده
Although international terrorism is not a new risk, the perceived nature of risk associated with terrorist attacks has changed radically with the unutterably abominable September 11, 2001 events (9/11) (Liedtke and Courbage, 2002). These attacks killed nearly 3,050 persons, leading people to perceive in which state of insecurity they were living. Until then the risk of such large-scale attacks was underestimated by a range of agents among which insurers, who may have considered that such a scenario appeared to be more a warlike event (so excluded by policies) and thus have underestimated the political difficulty to enforce war exclusions ex post. The levels of direct effect on insurance and reinsurance industry in particular and on insurability of terrorism risk in general are serious. Indeed, these attacks inflicted direct damage currently estimated at nearly $80 billion, about half of which was insured. Reinsurers (most of them European) will pay over half of the $40 billion insured losses. Having their capital base severely hit, most of them decided to drastically reduce their exposure to terrorism risk, or even stopped covering such a risk. Not only 9/11 constitutes the most costly event ever in the history of insurance (Swiss Re, 2002; Liedtke and Courbage, 2002), but this also reveals highly correlated risk at two different levels. First, multiple lines were affected instantaneously on 9/11 such that commercial property, business interruption,
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