Insurance

Insurance and its related products and instruments plays an important role in the management of risk and potential loss from terrorist attacks. This chapter will introduce the reader to the concept and structure of insurance and how the sector approaches catastrophic risks like terrorism. It will then explore the roles that insurance has, and that different actors play, in the process of insuring against loss caused by terrorism. In order to insure a risk, it must be possible to assess it and to model the potential loss to the insurer. So the process of how insurers assess and model the risk will be laid out. This sets the conditions for the challenges that such modelling faces and treatments of those challenges. The chapter concludes that the process of validation of models is critical to their success and is an excellent area for future research.