Prior to September 11, 2001, terrorism risks were not considered to be a threat to Austria’s population or industries and tended not to be excluded in primary insurance policies. On October 1, 2002, Austrian insurers in the Verband der Versicherungunternehmanen Oesterreichs (VVO, the Austrian insurance association) created Oesterreichischer Versicherungspool zur Deckung von Terrorisiken (The Austrian Terrorpool) in a response to the changing perception of risk following the terrorist events in the United States. The Austrian Terrorpool was created as a mixed co-insurance and reinsurance pool, with the primary object of offering affordable property cover against risks arising from an insured peril triggered by terrorism. The Terrorpool acts as reinsurance, with the direct writing insurer issuing a separate terrorism policy and then ceding the business to the Terrorpool. While terrorism cover and Terrorpool membership are optional, 99 percent of the Austrian Insurance Association (VVO) members belong to the pool. Members’ share of the pool is prorated to their market share in property insurance.
The Terrorpool consists of two layers, with the first layer rising to EUR50 million (USD70 million), and the second exhausting at EUR200 million (USD280 million). In an effort to avoid deterring the private sector from accommodating terror risks, the Austrian Ministry of Finance decided against offering a third layer of cover in the form of a state guarantee.
The Terrorpool also acts as reinsurance for property damage and business interruption arising from acts of terrorism. Initial premium covers up to a maximum limit of EUR5 million (USD7 million) per policy and location. If the sum insured is smaller than EUR5 million, then the corresponding sum insured applies. Insurance coverage also includes any kind of damages, losses, costs, or expenses that are the subject matter of the contract and are directly or indirectly caused by, result from, or are connected with actions taken for containing, preventing, or suppressing acts of terrorism – or that are related to them in any way.
In an effort to avoid deterring the private sector from accommodating terror risks, the Austrian Ministry of Finance decided against offering a third layer of cover in the form of a state guarantee.
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