Terrorism Risk Insurance

Advertisement No country can claim to be protected from terrorism risk. While counter terrorism has achieved great progress over the last decade, the threat of large attacks, using in particular chemical, biological, radiological and nuclear (CBRN) weapons of mass destruction as well as that of cyber attacks is real. The possible multiplication of medium-size terrorist attacks within a limited time frame is another major challenge.


Ensuring fast economic recovery in the event of such terrorist attacks is critical, and insurance plays a central role in this respect. Yet, modern terrorism risk is generally characterised by a set of specific features which translates into a lack of predictability of the target(s), the severity, and the frequency of future attacks. The conjunction of increased potential magnitude of highly correlated risks and growing risk unpredictability may fundamentally challenge the insurability of terrorism risk.


There is governmental responsibility not only in the prevention and mitigation of terror attacks but also in the definition of a suitable regulatory framework to operate in, whereas the insurance industry manages risk transfer and the financial impact of such attacks. To allow the establishment of sustainable solutions for terrorism risk insurance, some governments have engaged in national schemes under which insurers manage terrorism risk up to certain limits beyond which governments play a role of (re)insurer or guarantor of last resort. In a few other countries, purely private terrorism insurance solutions have been designed.

The heads of all the terrorism insurance programmes in OECD countries, the head of the terrorism insurance scheme of Russia and Israel (which has since become a member of the OECD) and more than 100 leading experts in terrorism insurance gathered together for the first time at the OECD in Paris in 2010. They agreed that co-operation and information sharing between all the stakeholders in the terrorism risk insurance market should be enhanced in response to the global terrorism threat. As very little regulatory and market information is available on a comparable basis on national programmes and markets, they decided that a permanent international e-platform on the financial management of terrorism risk should be set up to fill this information gap.

This e-platform monitors the evolution of national terrorism insurance programmes and the degree of government participation in these schemes. It tracks market trends, and identifies and shares best practices to continuously improve terrorism insurance solutions and financial resilience to terrorism. It is a source of information for risk managers, insurance market stakeholders and policy makers interested in a richer understanding of the financial management of terrorism risk.

The e-platform is managed by the High Level Advisory Board of the Disaster risk financing. It is the product of joint work between national terrorism insurance programmes, the OECD and, for country profiles, the World Forum of Catastrophe Programmes. Advertisement