Of Terrorism and FG's Intervention for Insurers

Source: This Day

Heightened killings by terrorists across Nigeria has made it imperative for the federal government to have a re-think on insurers' request for collaboration to provide terrorism insurance cover for Nigerians writes Ebere Nwoji

When the United States of America witnessed the tragic incidents of September 11, 2001 terrorists' attack on the world Trade centre, which claimed over 3000 lives, it cost insurers between $32.5 billion and $39.4 billion claims across many different lines of insurance businesses.

But Nigeria and some other countries were less concerned about what to do to prevent that from happening or to cover the damages if such happened, believing that terrorist attack could be peculiar to the developed world and also felt that the terrorism risks were uninsurable.

But with subsequent terrorists' attacks in other parts of the world, such as the 2002 Bali bombings, the 2004 Russian aircraft crash due to bombing and Madrid train bombings, the London transportation bombings of 2005, the Mumbai bombings of 2008 and the Mosco subway bombings, as well as the elevated terrorism threat levels issued by a number of countries, terrorism was pushed to the front burner in the media.

They also brought to the fore that terrorism risk has become a constant and perhaps growing threat today and for the decades ahead. For a country like Nigeria, today terrorism is no longer a threat but a major problem starring on the faces of both government and the insurers themselves.

Recent Cases

Recently, a Global Terrorism Risk Insurance Report indicated that at the global level, terrorist attacks and their specific consequences for insurers have become a rising trend.

For instance, in Sydney, Australia (2025) there was report of an armed assault at Bondi Beach, demonstrating that terrorist tactics are evolving and can occur across diverse global locations.

In Puerto Vallarta, Mexico (2026), violence classified as both terrorism and civil disorder at the airport and within the city, showing the blurring line between political violence and terrorism.

But despite these threats, the global insurance market remains stable. However, insurers are facing several specific financial and operational pressures.

Undoubtedly at the global market arena, there is massive accumulation of risks as a result of this. The biggest fear may not just be one attack, but one event triggering losses across multiple policies such as property, aviation, business interruption, and cyber risk simultaneously. The result, according to global insurers, is that assets in politically sensitive regions or high-profile urban centers such as hotels, malls are facing higher premiums, lower coverage limits, or exclusions for war-related risks.

Also rising cyber threats are making insurers to be scrambling to handle cyber terrorism, as attacks on critical systems can halt supply chains and amplify economic damage instantly. Internationally, because of continued evolvement of these terrorism risks there is a kind of reliance on government support.

Government support

For stability, insurers rely heavily on programs like the US Terrorism Risk Insurance Programme Reauthorisation (TRIPRA) which serves as federal terrorism insurance backstop that ensures the availability of terrorism risk coverage for property and casualty insurance in the US. It was created after the 9/11 attacks to provide a federal reinsurance backstop, sharing risks of terrorism losses between the government and the private insurance industry.

Under the TRIPRA, insurers are required to make terrorism insurance coverage available to policy holders who have the right to accept or reject it.

It preserves an industry aggregate loss trigger of $200 million for federal compensation to begin. In short, while balance sheets are strong enough to absorb current losses, the industry is tightening underwriting for high-risk areas as geopolitical tensions rise.

Effects on Nigerian insurers

In Nigeria, the menace of terrorism is no longer news as it has become daily occurrence especially in Bornu, Benue, Kwara and other northern states.

Though an insurer once said Nigerians' negative attitude towards insurance has turned to be a blessing in disguise as the entire industry's assets would have been wiped off as a result of frequent claims filings on account of terrorists' activities, the insurgency and its activities did not in any way leave insurers unaffected financially.

On the part of government, it has faced substantial fiscal pressure due to claims from terror-related deaths. For example, families of soldiers killed by Boko Haram filed claims of about N1.5 billion in the first half of 2013 alone under the Group Life Insurance policy.

With increasing rate of killings of soldiers including generals, one can imagine how much group life insurance claims hanging on the neck of both government and the insurers themselves in recent times.

On the part of the deceased families, delays often occur because the government fails to pay premiums on time, leaving beneficiaries waiting for compensation. A major gap was also exposed by the 2022 Kaduna train bombing, where experts noted that assets and passengers were largely uninsured against terrorism, placing the full financial burden on the government and families. One of the most direct financial consequences of terrorists activities on Nigeria is the "War Risk Insurance" (WRI) surcharge imposed by international shipping lines on Nigeria-bound cargoes. This covers potential losses from acts of war and insurrection.

Due to past insecurity (piracy/militancy), Nigeria has paid over $1.5 billion in WRI premiums to foreign insurers like Lloyd's of London in just three years. Shockingly, experts noted that Nigeria pays higher rates than Pakistan at the height of its terror crisis, describing the assessment as arbitrary exploitative.

In fact, experiences of citizens who fall victims of the terrorists' attack has identified the need for Nigerian Government and the insurers to join hands together and set up an initiative like the US TRIPRA.

Leaving victims of the terrorist act to the mercy of the public to contribute funds for their release is fast not yielding positive results as people no longer respond to such requests due to its frequent nature and the huge amount requested by the captors.

Insurers' Stand

At the initial stage of the insurgence in Nigeria, insurance operators insisted that terrorism risk was uninsurable. They placed terrorism in the same risk profile with climatic change losses insisting that the duo was uninsurable and that it was only government that could come to the rescue of victims of such risks.

The reason for their argument is not farfetched, the fact that acts of terrorism was intentional and that the frequency and severity of attacks could not be reliably assessed makes terrorism risks extremely problematic from the insurance stand point. While the general public and the media in particular continued to question whether terrorism could not be insured to provide remedy to the magnitude of damages caused, many insurers continue to give reasons why terrorism risk remained uninsurable.

"In a terrorist prone country, large segments of the economy and millions of workers are exposed to significant terrorism risk, but the ability to determine precisely where or when the next attack may occur is limited. This perhaps makes it uninsurable," an insurance expert has said.

But with the Boko Haram's insurgency in Nigeria which has left more than 12,000 people dead since 2012; terrorist attacks have become a regular occurrence in Nigeria hence the need for insurance policy design to mitigate against the losses.

Few years back, insurers said though they believe that terrorist attack was uninsurable, but the frequency of its occurrence demanded for coverage of victims through extensions. Recently, insurers came up with the idea of government considering creating an insurance intervention fund for victims of terrorism attack.

According to them, this has become necessary since it has become clear that the insurance industry doesn't have the capacity to cover risks associated with terrorism.

NAICOM's Effort

The National Insurance Commission (NAICOM), once carried the campaign to the media when at an interactive session, the commission called on both federal and state governments to set up intervention fund for insurers to go into terrorism insurance.

According to the commission, premium subsidy can help to make terrorism insurance cover available and increase demand while maintaining fundamental principle of risk-based premium even as public risk mitigation can make risk insurable and cover available.

An official of the commission cited example of what is obtained in the US in which government set up National Flood Insurance Programme where the state offers insurance capacity and insurance is distributed by private companies while some policies are subsidised by government.

"Nigerian government can subsidise premium in an economy as ours. If we have the kind of USA arrangement, it will help us because we need insurance to sustain development," he stated.

He also said for victims of terrorism to be fully rehabilitated, there should be premium subsidy by government through the creation of an intervention fund is the last resort.

Insurers' request from government in this regard did not start today. At the beginning of the Boko Haram activities in Nigeria, a former president of Chartered Insurance Institute of Nigeria, Dr. Wole Adetimehin, had made similar call in Lagos urging government to come up with intervention fund that would serve as a relief and support to insurance firms willing to underwrite terrorism.

"We have called on the government to come up with a sort of intervention fund that will provide relief to insurance companies and stakeholders willing to underwrite this terrorism insurance risks," he said.

Terrorism Underwriters

In recent times few insurance underwriters have ventured into partial terrorism underwriting but this involves a mix of specialised local insurers, global reinsurers, and strict anti-money laundering regulations.

Axa Mansard Insurance Plc, a major local underwriter, once paid the highest terrorism claims of N167.9 million to Dangote Cement in 2018.

Continental Reinsurance plc, provides critical backup capacity, helping local insurers manage risk by taking on portions of policies.

Africa Specialty Risks (ASR), is a specialised reinsurer offering tailored political violence and terrorism coverage to businesses in Nigeria.

The Nigerian Insurance Industry Reform Act (NIIRA) 2025 introduces strict requirements on Anti-Terrorism Financing. It said insurers must enforce Know Your Customer (KYC) and combating the financing of terrorism (CFT) policies.

Meanwhile some chief executive officers of insurance firms who spoke to THISDAY said single claims from terrorism insurance was capable of wiping off all the assets of the industry at a swoop. This being the case, they supported the idea that government support perhaps through funds and activities of the National Emergency Management Commission was needed.

Insurance sector analysts said if Nigerians were as insurance conscious as Americans, with the number of kidnappings done by the terrorists and number of people killed in their frequent late night attacks in some northern communities, insurance sector 's assets and capital would have been wiped out in claims payment.

The analysts said this has signified the need for collaboration between government and insurers to find solution to the problem because it is obvious that Nigerians cannot remain in their present low level of insurance awareness.