Insurance models against terrorism in Europe

The increase of the terrorist threat around the world has caused significant changes in the global structure of the insurances market. Not only that, this change has also been followed, supported and validated by the governmental authorities, that have been forced in many cases to act as a final guarantee for damages caused to industries, companies and individuals as a consequence of terrorist attacks.

Personal and material damage claims resulting from terrorism had not been for a long time a current issue before the attacks of September 11th in New York. Surprisingly enough, it was precisely in the United States that the paradox of insurance companies first took place. It was also because of the situation created by this events that some governments understood the need of a greater involvement of the state. Before the attacks that hit the world in 2001, the majority of insurance companies offered coverage against terrorist attacks. After the huge losses registered, a high percentage of them removed this item from their insurance packages.

The situation changed with the entry of government support, something that happened first in France and Germany, and that consisted in the responsibility on the state's part of responding to part of the indemnity.

The French authorities, the first to respond only two months after the attacks against New York's Twin Towers, where those who also offered broader guarantees and who, as of today, cover a greater percentage of the population against this risk. The Gareat program, in fact, does not cover the single individuals but rather works as a requirement for the insuring firms, with whom the government responds to the economic obligations resulting from suffered damages.

Spain has an act called Consorcio de Compensacion de Seguros, established after the civil war and updated on 2003 and that still serves as the resort to compensate damages caused by terrorism, an issue that has been object of long debates in the country because of the presence of the nationalist movement represented by ETA. This framework contemplates, as does the French programme, an unlimited guarantee by the state.

While the French program covers all types of terrorist attacks, whether they are of biologic, nuclear or chemical nature, or are related to public transportation means, other European initiatives like that of Germany and other countries do not include all the eventualities of an attack. This is because, since the subscription to the insurance policy is mandatory in France, available funding is such as to allow a greater protection when compared to other countries where insurance against this kind of risk is optional. Estimates indicate that in Germany only 30% of companies are insured against this threat, that in any case does not include attacks of nuclear or biological nature.

It looks like risk pooling is, once again, the most adequate solution for the protection of goods and individuals in damages management. The quote paid annually by companies and people, the percentage that is responsibility of the government and the indemnization part that is charged to the insurance company create a more balanced base upon which the coverage of damages outside every part's control cause a smaller impact whilst protecting all every part involved in the process.