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Property/casualty insurers are very likely to begin pricing “terrorist attack risk” separately from other coverages, according to a new forecast from Conning & Company. This and a reassessment of what constitutes maximum probable loss in a claim are two of the key enduring changes that are expected to sweep the p/c industry in the wake of the World Trade Center disaster. Another expected change related to the inevitable increase in losses is escalating premiums in commercial lines. The separation of terrorism exposure for coverage and pricing is another new factor. This should help facilitate better tracking of the losses and more precise pricing of the risk. Also likely is the recalculation of probable maximum loss (PML) estimates. The recalculation of PML may have a multiplier effect on prices. Insurers and reinsurers, faced with larger PML estimates, are likely to seek more reinsurance and retrocession support for their risks. As reinsurance capacity is consumed, prices will inevitably go up unless additional capacity is added.

Topics Trends