The demand for terrorism insurance by companies in the MiddleEast and North Africa remains low despite a high number ofterrorist attacks in the area and a market that is better-equippedto deal with them, according to a Lloyd's syndicateunderwriter.

According to a report of his remarks by Willis brokerage, DavidJames, senior underwriter from the Terrorism & Political RisksInsurance Practice at Ascot Underwriting, said, “Over 23 percent ofterrorist attacks occur in the Middle East and North Africa;however, this region accounts for only 4 percent [of] premium…inAscot's total terror portfolio.

“This is in stark contrast to North America, the biggest buyerof terrorism insurance, [which] accounts for some 26 percent ofAscot's terror portfolio, despite a relatively small number (1.2percent) of terrorist attacks.”

His comments were made during a presentation to insurers,brokers and reinsurers at the General Arab Insurance Federation(GAIF) at a forum in Manama, Bahrain, put on by Willis GroupHoldings.

As part of his presentation, Mr. James noted that the market forterrorism has developed “exponentially” in the last five years. Hecalled the market “developed and mature,” and said that capacityhas increased from $50 million in 2001-02 to $1.4 billion in2007-08.

Mr. James said, “The terrorism risk today is a truly globalphenomenon which is often regarded as being uninsurable due to itsunpredictable nature and the inability to apply traditionalprobabilistic modeling techniques to its assessment. The risk is ahuman one; however, that does not mean that it necessarily shouldbe regarded as uninsurable.”

Mr. James also said that while take-up is low in the Middle Eastand North Africa, there has been an increase in coverage purchasedbecause of a “massive investment” in the region, which fuels adesire by companies to fulfill lenders' requirements, which usuallystipulate comprehensive coverage to include terrorism cover.”

He added that there is a growing need for local insurers toprovide coverage, but he noted that many insurers avoid writingsuch risks as it is not part of their traditional book of businessand they do not have adequate reinsurance treaties. Mr. James saidthe Lloyd's market has “significant specialist expertise and skillsin this niche area to partner with local insurers on tailoredsolutions for Middle Eastern companies.”

Speaking to the market, Mr. James' presentation noted there arecurrently few real leaders. He suggested several underwritingconsiderations for writing terrorism risks in the region, includingrisk management of the facility owner, occupancy, building type andindustry. For pricing risks, Mr. James suggested that insurersutilize data to create an acceptable mode and to consider risksindividually.