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FOR IMMEDIATE RELEASE
LONDON - NOVEMBER 26, 2014 01:01 PM (EST)
A.M. Best does not expect rated insurers to be impacted by the amendments to the Counter-Terrorism and Security Bill announced today, making it illegal for insurers to reimburse ransom payments made to terrorist organisations.
The Best's Briefing, titled "A.M. Best Comments on UK Counter-Terrorism and Security Bill Legislation," notes that as Kidnap & Ransom (K&R) insurance in areas affected by terrorism tends to represent only a small proportion of the overall portfolios of London Market insurers, A.M. Best does not anticipate taking any rating actions on insurers in response to the Home Office's changes. Furthermore, A.M. Best notes that K&R insurers are prohibited by the United Nations from paying or reimbursing ransoms to proscribed terrorist organisations and policies typically exclude such payments.
Insurance for K&R is primarily underwritten in Lloyd's, with the London Market accounting for approximately half of premiums. "In recent years, this business has proved attractive to specialist underwriters following a spike in rates in the wake of increased kidnapping and demands for ransom payments by Somalian pirates, particularly in the Gulf of Aden," said Catherine Thomas, director, analytics. "The new terrorism bill is not expected to be detrimental to the business model of K&R insurers. While insurers generally provide cover for reimbursement of ransom payments under K&R policies, only a small proportion of policies are in regions where terrorist activity occurs."
Yvette Essen, director, industry research - Europe & Emerging Markets and author of the briefing, added: "Rates rose significantly in response to an increase in piracy in the Gulf of Aden five years ago, and steps were taken to reduce activity. In the past few years, the more established K&R participants have increasingly focused on risk management to prevent kidnappings from occurring in the first instance. While kidnapping is still common in Latin America and is growing in Africa, especially in Nigeria, rates have softened in recent years, given the reduced number of claims."
To access a complimentary copy of this briefing, please visit, http://www3.ambest.com/bestweek/purchase.asp?record_code=231195 .
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