Insurance giants plan special cover for terror attacks

Swiss Re is one of the big three insurance groups searching for a solution to the crisis in the insurance industry Keystone

Three of Europe's biggest insurers - including Swiss Re and Zurich Financial Services - are in talks to set up a specialist terror insurer.

German insurer Allianz along with its Swiss counterparts said on Thursday that they were in talks to set up a company to take on the risks, which insurers have refused to accept since the attacks that destroyed the World Trade Center.

But the three companies repeated their calls for state involvement in providing cover for terror risk.

Large European companies have found it very difficult to get insurance coverage against the risk of terror attacks on chemical plants, offshore oilrigs and large office buildings since the September 11 attacks.

Risks too big

Munich Re, the world’s biggest reinsurance group, no longer automatically includes the cover of so-called terrorist attacks in its reinsurance policies and reserves the right to cancel contracts with as little as two weeks notice.

“Allianz Global Risks is currently taking part in discussions regarding the setting up of a private company to provide international cover for terror risk,” Allianz board member Detlev Bremkamp said in a statement.

“Such a company can only serve as a supplement to the involvement of the state in the cover of terror risks. It would only have a limited capacity but it would offer cover for the whole of Europe.”

Public/private partnership

A spokeswoman for Swiss Re, the world’s second largest reinsurance group, confirmed the initiative, adding it recommends a public/private partnership to resolve the issue of terrorism risk cover.

Swiss Re has also been urging governments to take on an active role as insurers of the last resort for terrorism risk.

Swiss Re said that before September 11, the assumed maximum losses for terrorist acts were controllable and therefore not explicitly excluded from property policies.

“As it is impossible to accurately assess the probability and severity of terrorist attacks… terrorism is only insurable on a very limited basis. Swiss Re therefore recommends that governments and insurers work together to develop solutions.”

Insurers of last resort

Swiss Re said that solutions included mandatory direct insurance, under which all property risks are automatically covered against terrorism risks. It also cited a levy on current property premiums and a greater sharing of the loss burden.

Last year, Allianz chief executive Henning Schulte-Noelle, proposed a system similar to the British Pool Re system, which was introduced in Britain in the 1990s in response to attacks by the Irish Republican Army.

Under Pool Re, the British government acts as an insurer of last resort for damage to property in Britain resulting from acts defined as terrorism.

swissinfo with agencies