Political Risk, Terrorism and War
Catlin is one the market leads for terrorism business. We lead over 40% of our risks by volume, and a third by premium income. Roughly half of the terrorism income emanates from the USA. This may well increase next year following uncertainty over whether or not TRIEA will be renewed. The rest of the account has a worldwide split, with significant premiums generated from the UK, Germany and the Far East.
On a handful of policies we provide broader strikes, riots and civil commotions coverage – and even occasionally extend this to war on land too. The terrorism part of the account is written on a predominantly direct facultative open market basis. The main reinsurance element of the book is Latin American or captive buyouts in relation to TRIEA.
We do write some binder business, the obvious examples being insuring the German Government backed terrorism scheme (Extremus), Marsh SME business and Singaporean business where Catlin Asia is actually the coverholder.
In accumulation terms, we can write up to USD 150m per 700m diameter blast zone (limit is set by reinsurers). We do not currently PML the account. However, we are looking at licensing a new risk aggregation model (Intech) which will potentially enable us to start a PML process. This would be very useful as the USD 150m cap is proving restrictive in some areas.
Catlin is a significant player in the London war market and a recognised leader in the class. The class has been written since the earliest days of Catlin. War policies are unique in that whilst cover is granted on a 12 months basis, they are subject always to a cancellation clause. Immediate automatic cancellation takes place if there is an outbreak of war between any 2 permanent members of the U.N. Security Council or the detonation anywhere of a nuclear weapon.
Geographical exclusions may also be amended, or a general notice of cancellation to amend pricing may be given, subject to 7 days notice of cancellation. The account is predominantly written on a direct basis. The high volume, low premium nature of the business lends itself to the use of brokers’ lineslips.
The volatile nature of this class means that it is not written on a binding authority basis. The Catlin war account is written in both Lloyd’s (am) and on the Catlin Trading Floor (pm). The vast majority of the income is written in London, but Catlin Asia play an increasing role within the hull account, with dedicated class underwriters in both Hong Kong and Singapore.