While the total of terror attacks has declined on a globalbasis, the number of incidents remains at historic highs andinsurers need to continue monitoring situations to betterunderstand risk, says Guy Carpenter.

In its continuing series GC Capital Ideas, thereinsurance broker says that based on figures released by theNational Counterterrorism Center, there has been a general declinein the number of terror attacks over the past five years from theirpeak of 14,400 in 2006. According to the NCTC, there were over 10,000terrorist attacks in 2011 resulting in over 12,500 deaths.

However, when viewed over an eight year period, 2004, when theNCTC began collecting data, to 2011, the levels today remainhistorically high.

“Unlike other perils, (re)insurers struggle to quantify the riskposed by terrorism due to its unpredictable nature,” says GuyCarpenter, adding that its unpredictability is rooted in the humanelement that is difficult to quantify.

There are measures that the carriers can take to “improve riskawareness” however, says Guy Carpenter.

By monitoring world events and locations, plus the number of“foiled attacks can help (re)insurers better understand therisk.”

Companies need to be informed of developments “to assess therisk of doing business in certain countries.”

Among countries that Guy Carpenter says clients need to be waryof doing business in are Somalia and Yemen with the rise ofterrorism linked groups.

Others nations where terrorism remains a high risk includeAfghanistan, Iraq, Israel, Pakistan and the Palestinianterritories.

The risk threat extends beyond these countries to other areas ofthe Middle East and North Africa.

Guy Carpenter cautions that while the threat of terrorism isreduced in Europe and the United States, both remain on the radarof those targeting Western countries.

The broker notes too that the threat of terrorism has changed over the years from large-scale andspectacular attacks to soft targets “with attacks and plotsbecoming more localized.”

For insurers, the most significant events since 9/11 have beenthe Madrid train bombings of 2004, the London transport networkattacks in 2005 and the Mumbai shootings in 2008.

Lone attackers have cropped up in the United States, where manyplots have been foiled. However, “intelligence agencies warn it isalmost inevitable that a cell will successfully execute an attackat some point in the future.”

“For insurers with terrorism risk on their books, it isimportant to understand how the terrorism threat is evolving, thevarying risks in different regions and what developments and riskare likely in 2013 and beyond,” Guy Carpenter advises.