Insurers expect spike in terrorism cover

The demand for insurance cover for terrorism is likely to see a spike in the wake of global terror threats after the Paris attacks. Premiums for such covers are also likely to rise.

“We expect to see a rise in the number of individuals and firms opting for insurance covers for terrorism, war and political violence due to heightened awareness after these incidents,” said a senior official at the General Insurance Corporation.

Cover against terrorism is typically offered as an add-on with property insurance, but is also available as a standalone policy. Industry experts say that currently only major corporations and big hospital chains opt for property insurance that covers terrorism.

Sanjay Radhakrishnan, Chief Executive, JLT Independent Insurance Brokers, said: “If you look at the Paris attacks, we are now seeing attacks on crowded spots, such as malls, restaurants and cinema halls, which may not be buying these policies.”

He expects smaller informal establishments, such as restaurants and malls, among others, to now opt for property insurance policies that cover terrorism.

At present, general insurers provide property insurance from the Indian Market Terrorism Risk Insurance Pool. The pool was formed as an initiative by general insurers in April 2002 after terrorism cover was withdrawn by international re-insurers post the 9/11 attack in Mumbai.

Insurers say premium for terrorism cover has been on the decline during the last few years as the pool has seen no major losses. The capacity of the pool has also swelled to ₹4,500 crore.

However, insurers feel that the increase in global turmoil and risk perception may result in a rise in premium for property insurance.

According to Mukesh Kumar, Executive Director, HDFC ERGO, “While we don’t see any immediate impact as these incidents do not have a direct bearing on India, the increased number of such incidents and continued increase in the threat perception may impact terrorism premiums.” 

Insurers also expect more travellers to additionally opt for coverage of terrorism risk in their travel insurance policies. JLT’s Radhakrishnan said that unless explicitly mentioned, travel insurance policies do not cover claims resulting from terrorism.

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