Restricted capacity, limited modelling and lack of demand from smaller organisations is hampering development of a substantial terrorism market as the focus of attacks shifts, according to Guy Carpenter executives.

MD Charles Gibbs says attacks are moving towards mass-casualty and fear-inducing events, and away from physical damage.

Private cover is emerging to address non-physical losses such as denial of access, but limited terrorism capacity is heavily weighted towards larger-scale corporations, rather than small businesses that could benefit the most.

“The small number of players offering terrorism cover significantly heightens the potential for accumulation risk if efforts were made to push cover into the wider market,” Mr Gibbs says. “At present, there simply isn’t the incentive to extend out to the SME sector.”

Restricted modelling capabilities for terrorism remain a barrier to market expansion.

Guy Carpenter VP Jamie Russell says modelling is limited by a lack of claims data, especially for the more diverse covers now on offer.

“Development in this area will aid insurers with their portfolio management, and unless this is addressed, coupled with modelling capabilities that can support improved frequency analysis, insurers will continue to be restricted in how far they can extend their offering,” he said.

Mr Gibbs says customer demand that would spur modelling investment is lacking at the SME level, amid a lack of awareness about potential threats and exposure.