Terror Insurers Struggle Despite World Cup

This summer's World Cup approaches and providing for the safety of millions of soccer fans has led to a slight bump in interest in terror insurance.

Unfortunately, it hasn't meant a rise in premiums for terror insurer Extremus, which insures five World Cup stadiums, as well as a number of other airports and soccer-training facilities. Company chairman Bruno Gas said his firm saw a 22% drop in revenue despite an increase in the number of policies sold last year.

Companies looking for short-term insurance just for the World Cup have to pay 55 percent of a normal 12-month premium for the duration of the tournament. But soccer stadiums that Extremus already covers have kept rates equal to what they paid in 2005.

"Step by step, we've becoming acquainted with reality and can declare that terror insurance has actually become a fundamental coverage needed for a meaningful clientele," Gas said while presenting the firm's financial statements in Cologne last week.

Perceived threat

Extremus currently has 1,109 companies currently on its books. Even though that's 39 more than last year, the insurer's revenues dropped in 2005 by 17.3 million euros ($21 million) to 60.2 million euros.

But Gas said he thinks Extremus will continue to sell more policies as Germans feel more threatened by their position as a Western country and as the effects of terrorism become more visible.

"The perceived threat in Germany is increasing slowly but steadily," he said. "Who would have thought six months ago that Denmark could ever be in the center of such considerations," he asked, referring to the violence that broke out over Danish cartoons depicting the prophet Mohammed.

Government backing

Extremus is backed by both the German government and private investors. It insures assets of 25 million euros or more; smaller sums are covered by normal fire insurance.

The company gets more and more business from the real estate industry, along with the tourist trade, transportation providers and the financial industry, Gas said. Industrial customers, once Extremus' main clients, are investing less in the added insurance.

Premiums that keep big customers away and companies willing to accept a higher deductible if they ever need to make use of the insurance are among the factors keeping the company from rapid growth, Gas said.

Finding international reinsurers to back Extremus' 2 billion euro liability is also difficult, he said.

"It is still difficult to find 2 billion euros worth of reinsurance for terrorism risks in Germany," he said. "The international insurance market, including the German market, is clearly more adverse to risk than German companies looking for policies accept."

The German government, however, covers the rest of the company's 10-billion euro liability, a commitment it extended on July 8, one day after the London terror attacks.