Terrorism insurance – additional information
The most costly terrorist attack for the insurance industry until 2016 was the crash of hijacked airliners into World Trade Center and Pentagon on September 11, 2001, which incurred insured property losses of over 25 billion U.S. dollars. The total insured losses caused by man-made catastrophes globally amounted to 34.53 billion U.S. dollars in that year. Man-made disasters include, apart from terroristic attacks, major fires, explosions, aviation catastrophes, rail and maritime disasters, mining accidents or collapse of building or bridges.
The risk of being exposed to terrorist attacks has led to the development of terrorism insurance, incorporating both insurance purchased by property owners to cover their potential losses and liabilities as well as health and life insurance purchased by individuals.
Calculation of the terrorism insurance premiums is much more complicated than in case of other types of insurance, particularly due to the random nature of the terrorist attacks and too many unknowns in the possible loss assessment process.
Insurance companies can transfer a part of risk to the reinsurance companies. In case of tremendous insured losses, the costs are then shared between various participants. Sometimes the government contributes some funds as well, like in case of September 11, 2001 terrorist attack.