Insurance Marketplace Realities 2024 – Terrorism and political violence

Rate predictions: Terrorism and political violence

	Trend	Range
Terrorism and sabotage
Non-volatile territories		+5% to +15%
Some volatility and/or isolated events		+10% to +20%
Major volatility and/or widespread risk of major incidents		+20% to + 30%
Political violence
Non-volatile territories		+15% to +30%
Some volatility and/or isolated events		+30% to +50%
Major volatility and/or widespread risk of major incidents		+50% or higher

The crisis in Ukraine, the latest and most significant potential loss to the terrorism and political violence market in years, has ushered in changes mandated by treaty reinsurers.

• Insurers continue to push rate as they attempt to rebalance their books against increasing losses and treaty costs but attempting to balance this over a multi-year period rather than the sudden sharp increase, they saw on their 2023 treaties.
• Many midyear 2023 treaty renewals saw lower increases than their renewal in 2022.
• Coverage changes on treaty reinsurance programs include distance limitations for anyone ‘occurrence,’ increasing the potential for significant increases in retained risk for any dispersed event, such as nationwide civil commotion losses experienced in the United States in 2020.
• At this time, most insurers are not looking to push these reinsurance occurrence clause changes onto clients but will be factoring these changes into rates.
• Coverage changes directly felt by clients is the retraction in appetite for contingent and non-physical damage coverage, as well as limiting interest for binding multiyear programs.
• Potential for reactive pricing to quickly jump remains, either in specific regions due to varied and ever-changing security risk environments or globally in case of further catastrophic loss events.

Overall market capacity has not dramatically changed but expectation for actual reductions in line size deployment on individual risks.

• Overall theoretical market capacity has not dramatically changed post-treaty renewals, but actual reductions in line size deployment on individual risks – on average 40% more carriers required in 2023 to complete the same placement from previous years, especially in high-risk territories, heavily aggregated locations, and for policies with wider political violence perils.
• Insurers reviewing aggregation models for strikes, riots and civil commotion due to recent events, coupled with reduced aggregate availability and greater “per city” retentions following treaty renewal.

Disclaimer

Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).

Each applicable policy of insurance must be reviewed to determine the extent, if any, of coverage for losses relating to the Ukraine crisis. Coverage may vary depending on the jurisdiction and circumstances. For global client programs it is critical to consider all local operations and how policies may or may not include coverage relating to the Ukraine crisis. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal and/or other professional advisors. Some of the information in this publication may be compiled by third-party sources we consider reliable; however, we do not guarantee and are not responsible for the accuracy of such information. We assume no duty in contract, tort or otherwise in connection with this publication and expressly disclaim, to the fullest extent permitted by law, any liability in connection with this publication. Willis Towers Watson offers insurance-related services through its appropriately licensed entities in each jurisdiction in which it operates. The Ukraine crisis is a rapidly evolving situation and changes are occurring frequently. Willis Towers Watson does not undertake to update the information included herein after the date of publication. Accordingly, readers should be aware that certain content may have changed since the date of this publication. Please reach out to the author or your Willis Towers Watson contact for more information.

Contact

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Fergus Critchley

Head of Crisis Management, North America

email Email phone +1 212 915 7651

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