Terrorism has developed into a threat that affects every aspect of society and knows no national boundaries. As recent terrorist activities in major cities – notably, the 11 September 2001 attacks in the United States – have made strikingly clear, terrorism has developed into a threat that affects every aspect of society and knows no national boundaries. Although there is no internationally binding defi nition of terrorism, some aspects can be agreed on: it seeks to cause human suffering, to instil widespread fear, and to disrupt life and business. The insurance industry has responded to this evolving hazard, and is doing all in its power to manage the terrorism risk. However, as with all new emerging risks, there are some challenges involved. Despite efforts such as comprehensive data pooling and the development of dedicated state-of-the-art risk management tools, terrorism continues to defy conventional risk modelling. As a result, insurers remain compelled to limit the amount of terrorism insurance they offer.
