Terror cover costs seen rising yet again

Sentiment on terrorism risk will suffer with a series of seven blasts that rocked the European financial capital of London. Since the US attacks on September 11, cost of terrorist cover had sky-rocketed, but had then eased over the last couple of years.

Today insurance leaders pointed out that the cost of terrorism cover could well increase depending upon the size of claims that follow.

"Impact on terrorism coverage will depend upon which organisation is behind the attack, and what underwriters perceive will be the impact of the same," said the CEO of a European broking outfit.

It has been reported that the secret group of Al-Qaeda in Europe claimed responsibility for the attacks. Sources stated that it is most likely that the attacks will not involve huge claims as the British tube is unlikely to be insured.

Since September 11, the only major terrorism attack took place in Madrid, Spain, which is equally perceived as an international trading centre like New York and London.

Today attacks rocked London's transport system during the rush hour on Thursday morning, resulting in numerous casualties.

"All our employees at the broking house have been asked to stay indoors and not leave the office premises till further notice," said a CEO of an insurance company, whose foreign partner has an office near Liverpool station which came under attack.

On renewal of insurance covers this January, terrorism cost had become cheaper by 15 per cent.

India too, had rationalised its pricing, reducing the cost of coverage to vary from 12 to 30 paise. In addition it has also raised the limit of terrorism cover to Rs 500 crore from the earlier Rs 300 crore, effective February 2005.

The 2001 attacks on America had rippling effect globally, and the corporate world is still recovering from the impact. Following the attacks, terrorism cover was introduced in India and was priced at 50 paise for every Rs 1,000 sum assured (that is the value of the property) in the case of industrial risks and 30 paise for every Rs 1,000 sum assured in the case of non-industrial risks. It has since fallen to 30 paise and 12 paise, respectively.