When you look at recent terrorism events, I think New Orleans being a good example of this, you have seen attacks where they've been very limited property damage, but a huge human impact. These attacks are unlikely to meet the TRIA definition, which require very stringent requirements, and therefore clients can get that certainty of coverage from the terrorism liability market.
PETER BRANSDEN: What are some of the biggest challenges facing the TPV market in 2025?
HENRY MALLIN: I think 2025 is a challenging year for the market. You've seen an increase in capacity, bringing a slight softening of market conditions, just at a time where geopolitical instability feels as high as ever. I think it seems as if global political violence losses are probably more of an inevitability than a probability over the next couple of years.
You have ongoing conflict situations in the Middle East, Ukraine, Sudan, Mozambique, Colombia, to just to name a few. I think the military operations in China in relation to Taiwan are increasingly difficult to ignore. And you've seen a marked increase in political discontent towards the political status quo, which may manifest itself in a period of global civil unrest.
You've seen a rise in both far right nationalism and Islamic extremism. So there are certainly things that are keeping us up at night. And I think as the market softens, it's increasingly important to provide stable capacity, robust long-term solutions to protect clients against their political violence perils.
PETER BRANSDEN: From the perspective of an underwriter in this class of business, what's the most difficult part of your job?
HENRY MALLIN: I think a key challenge that we face is, given the nature of our perils, which are lower frequency and higher severity than a number of other P&C classes. We don't have that scale and depth of claims data when underwriting our class. I think when you combine this with the man-made nature of our perils, which inevitably bring further volatility and uncertainty, I think you will-- it makes it very challenging to underwrite it.
I think we are looking to try and address this by using geopolitical insights incident reports, both on a global and occupancy basis to try and provide more informed solutions. I think one of the other challenges is the slight blurred nature of some of our political violence perils. That to try and distinguish between an ideologically motivated attack that forms part of the terrorism definition and some protest movements is really tricky.
I think you've seen an increase in state backed sabotage events on critical infrastructure, offshore cabling, and it's really difficult to see where that sits in the suite of political violence perils. I think it's important for clients to really think about the perils that they're looking to purchase, because it might mean that they need a wider political violence solution than just purely conventional terrorism.
PETER BRANSDEN: How do you think the underwriting of terrorism and political violence insurance might evolve in the next 24 months?
HENRY MALLIN: I think you'll definitely see a increase in automation. We work in a very high volume class where speed of underwriting decision and efficiencies in underwriting process are key to success.
At AEGIS, we've spent a lot of focus on our OPAL terrorism product, which is available throughout the Willis network. This provides instant quotes and instant documentation via quote to bind solution, accessing the London market very quickly, and the digital efficiencies that gives us the ability to have competitive pricing. I think in the open market piece, there's an increased focus on risk ingestion and access to key data sets to improve the underwriting process that we're offering.
PETER BRANSDEN: What do you think is the most important thing that policyholders should know about terrorism and political violence insurance.
HENRY MALLIN: I think they should consider whether or not TRIA is the right terrorism protection for them. TRIA is really easy to purchase, but it's designed for catastrophe-style losses that might not be appropriate for all businesses. You have stringent requirements to meet from government officials certifying these acts that's never been approved.
You have five million worth of property damage requirements, which may be less suitable for SME businesses and for clients where you have large schedules, but individual locations are relatively small. You also have to have-- you need to match the program structure of P&C programs, and therefore the limits and deductibles that are on those programs may not always be applicable to our classes. There's also an element that is priced at a percentage of those P&C programs, rather than being priced specifically for the risk in question.
So there is definitely the advantage of buying standalone coverage, which offers tailored solutions, bespoke products that is broader coverage and often at more competitive pricing.
PETER BRANSDEN: Henry Mallin, underwriter of war and terrorism at AEGIS. Thank you very much.
HENRY MALLIN: Cheers. Thank you for having me.
