Tony Gallagher, Asia Pacific CEO of Guy Carpenter, the global reinsurance brokerage of Marsh Group, detailed the central role of reinsurance, retrocession and terrorism pools in supporting market capacity in a rapidly changing threat landscape.
Speaking at the Global Forum of Terrorism Risk Pools and Their Stakeholders, Gallagher centered his remarks around the idea that disruption is always the norm.
In reviewing Sydney’s history, he noted its colonial past and recent economic transformation before turning to the present. He described the current environment as “profound change, risk and disruption”, echoing the World Economic Forum’s description of “multiple crises” with multiple risks compounded.
Gallagher said that in this context, the form and impact of terrorism are constantly evolving. “We know that under such pressure, bad actors will lash out at the world out of grievance. Their tool is terror,” he said.
Referring to events in Sydney and elsewhere, he noted that while terrorism was not new, its manifestations were changing, with criminals increasingly integrating into organized crime networks to enhance “their resilience, financial resources and scope of operations”.
Gallagher draws on analysis from Guy Carpenter and Marsh’s latest terrorism risk study to trace the evolution of threat actors from hierarchical organizations in the 1990s to “digitally connected units in the 2000s,” then “dispersed ideological networks in the 2010s” to “interconnected state and non-state actors” now.
At the same time, he said the nature of attacks had shifted from large-scale property damage to incidents targeting people, with “increased frequency, milder severity and a wider range of targets, weapons and tactics”.
He added that motivations now range from religious and political drivers to “nihilistic rage,” while the tools available to attackers have expanded to include cyber capabilities, artificial intelligence, drones and encrypted communications. Gallagher warned that cyberattacks will increasingly move beyond data breaches to disrupting critical infrastructure, impacting “transportation, health, power, water, banking or any system we rely on.”
For the reinsurance industry, this creates a more complex and interconnected risk environment. Gallagher said reinsurers must now deal with “an increasingly complex risk landscape where traditional models must evolve to capture new threat vectors” including cyber-terrorism, political violence and chemical, biological, radiological and nuclear risks.
In this context, he positions reinsurance as a key component of social resilience. “We are part of the antidote to terrorism,” said Gallagher, who saw the industry’s role as not just financial but structural. “Our work in reinsurance is about economic systems and structures that help individuals, businesses and communities bounce back,” he said, noting the immediate and long-term economic consequences of the attacks.
Gallagher tied this directly to the September 11 attacks, which he called a defining moment for the industry. He noted that the event reshaped the understanding of terrorism risk and led to the creation of public-private solutions, such as the Terrorism Risk Insurance Act, which established federal reinsurance support in the United States. He said it showed how government and industry could work together to “stabilize markets and protect the economy”.
A central focus of Gallagher’s speech was the development and continued importance of terrorism reinsurance pools. Reflecting on their origins, he said they emerged in recognition of a “market failure or protection gap” when private insurance capacity alone proved insufficient to meet demand. However, over time, their role expanded significantly.
“What started out as a response to specific shocks has now become a dynamic platform for managing the changing risk landscape,” Gallagher said, highlighting that many risk pools have broadened their scope to include not only traditional terrorism risks but also chemical, biological, radiological and nuclear threats, as well as business disruption and cyberterrorism.
He singled out recent legislative changes in Australia to bring state-sponsored terrorism within the pool’s remit, noting that “this is important in a world where the line between rogue individuals and hostile state actors is increasingly difficult to draw”. This clarity helps provide appropriate protection to policyholders while allowing insurers to innovate around defined coverage, he added.
Gallagher also highlighted the scale of capacity that mining pools bring to the market. He pointed out that traditional terrorism treaty reinsurance capacity is about $4 billion, while TRIA provides $100 billion of capacity and the Australian insurance pool provides more than $10 billion of capacity. In his words, the disparity highlights “the importance of funding pools in providing terrorism capabilities to support communities and businesses.”
He underscored this point by citing the scale of past losses, noting that the World Trade Center attack remains the costliest terrorist incident in history, with losses exceeding $40 billion at the time and much greater in today’s terms.
A key technical theme throughout Gallagher’s presentation was the importance of setbacks in supporting these structures. “At the heart of this evolution is the importance of retrocession protection,” he said. “By ensuring appropriate retrocession, pools can manage peak risks, protect their balance sheets and sustain reinsurance markets to support terrorism.”
Gallagher warned that without adequate retrocession, the pool’s ability to absorb large losses and provide ongoing capacity would be “significantly diminished”. He added that this layer becomes even more important given the current geopolitical environment and the potential for more systemic and correlational losses.
Gallagher also explores how the terrorism pool will evolve to meet future challenges. He noted growing interest in alternative risk transfer solutions, including parametric products, and increasing investment in data analytics and probabilistic modeling to support more accurate pricing and risk assessment. He said these advances would help boost investor confidence and expand the sources of funding available in the market.
He highlighted the role played by capital markets through the issuance of catastrophe bonds, citing examples such as Pool Re in the UK and GAREAT in France. He said the deals were bringing new investors into the terrorism risk space and “bringing taxpayers closer to potential losses.”
Additionally, Gallagher noted that some capital pools are investing in risk reduction initiatives, including partnerships with governments to enhance counterterrorism capabilities and encourage businesses to adopt protective security measures. He also noted that the growing reach of cyberterrorism reflects the growing importance of digital threats versus physical attacks.
Looking ahead, Gallagher warned that any reduction in government support for terrorism would need to be carefully managed. He said any major changes should be gradual and send a clear signal to the market to avoid disruption and ensure there is still sufficient capacity.
He concluded by stressing that terrorism risks remain systemic in nature and require continued cooperation between the public and private sectors. He said IFTRIP plays a vital role in facilitating this collaboration, providing a forum where pools, policymakers and industry players can share insights and develop a coordinated response.
Ultimately, Gallagher’s message is that terrorism reinsurance pools, backed by strong re-scores and public-private partnerships, are not just a last resort. As he puts it, they are “proven strategic tools” that enable markets to function, support economic resilience and ensure protection remains available in an increasingly uncertain world.
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