It is not yet confirmed whether terrorism is a factor behind the crash of EgyptAir’s Flight MS804, but the tragic incident brings to focus the terror insurance market, and what insurers are developing in response to an uptick in reported terror events.
Julian Enoizi, chief executive of Pool Resinsurance Company, says there’s a “heightened sense of nervousness” around travel, leading to strong competition and growth within the terror coverage market.
“I think what you’ll see is the insurance market will start to develop products that are aimed specifically at the type of terrorism we’re seeing,” he says. “So whether it’s a lone shooter policy, or it’s business interruption that’s triggered by property damage, the insurance market will start to innovate new kinds of products, and I suspect that will include products for tourists.”
Business interruption as a result of terror incidents is a particularly growing focus, as whole neighbourhoods or cities can shut down when on high alert. “If you look at the situation that has evolved after the Paris terror event, when the Brussels city centre was shut down, that is what the insurance market would call non-damage business interruption,” he says. “There was no damage caused but there was economic loss - and is there is a policy coverage form you can develop to cover that?”
‘Lone shooter’ policies are also becoming more prevalent, following an uptick in public armed assaults in the U.S. and globally. “(It is) a scenario which could occur in any location, in any supermarket or shopping mall,” he says. “It’s trying to cover a situation where you’ve got someone causing damage and death in that means, and that seems to be a modus operandi that the security forces are worried about now, and the insurance industry has reacted by creating the product.”
However, a knowledge gap exists among consumers who may not know their coverage options when travelling, especially to high-risk regions. “I’m not sure your average tourist is looking at his insurance policy and checking if it has terrorism coverage, says Enoizi. “There’s always more that either the insurance industry or the government can do to educate the public as to the risks they may be running and insurance coverage is another measure they can take to mitigate that.”
As to whether an increase in terror incidents will hike travel insurance premiums and ticket costs for travelers, Enoizi says such a markup has yet to occur, but that it’s possible. “Clearly there must be an increased cost for airlines to ensure ever-increasing security,” he says. “Terrorists are evolving their techniques, and security and airlines in tandem have to evolve their terrorism measures, and that therefore has a cost to it. Whether that cost then gets passed on to the consumer, I don’t know.”
