The terrorist attack on the World Trade Center and the 26/11 Mumbai attacks have sent shock waves across the world. Security and safety can no longer be taken for granted. Terrorism, although not new to the world, astounds us due to the extent to which it has spread. Governments all over the world are trying to control terrorist activities. A terrorism pool for property insurance was created in India in 2001. This has been of immense help to mitigate the huge damage caused. However, there is a growing need for creating awareness among the general public and corporates to take cover against terrorism risk.

The terrorist attacks of September 11, 2001 produced insured losses larger than any natural or man- made event in history. The losses sustained by the insurance industry were unparalleled in every respect. The claim settlements amounting to $35.9 bn represented not only property coverage, but also life insurance, business interruption, health, disability and workers compensation lines. Aviation and liability insurers also suffered record losses emanating from a single event. The sheer size of the loss (exceeding $90 bn) shocked everyone, especially coming from an entirely unanticipated peril for which no premium had been collected. The attacks killed over 3,000 people from over 90 countries. The insured losses were shared by nearly 150 insurers and reinsurers all over the world.

The 26/11 operations must have cost a mere Rs. 1 cr to the perpetrators but the cost of the damage inflicted was approximately Rs. 4,000 cr. In extreme circumstances, a terrorist attack could cause an insured loss of hundreds of billions of dollars, thereby eroding the insurance industry's entire capital in one swoop.

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