Global terrorism and political violence risks are becoming more complex and interconnected even as dedicated insurance markets remain broadly stable, according to Marsh's 2026 Global Terrorism Risk Insurance Report and fresh analysis from Morningstar DBRS.

According to Marsh's report, terrorism threats have shifted from large, hierarchical plots focused on landmark properties to more dispersed networks using a wider mix of tactics, including low‑tech physical assaults, cyber operations and emerging nuclear, biological, chemical and radiological (NBCR) scenarios.

Recent low‑sophistication but high‑impact events, such as the 2025 New Orleans truck ramming and the Bondi Beach armed assault in Australia, illustrated the human and business toll of physical attacks. At the same time, terrorism‑linked cyber incidents have wiped critical systems and disrupted global operations, highlighting how cyberterrorism can halt supply chains and magnify economic damage.

"Heightened geopolitical tensions, including the ongoing US‑Iran conflict, are driving an increasingly complex and evolving terrorism threat landscape that is blurring the lines between terrorism, political violence and civil unrest," said Tarique Nageer, terrorism placement advisor at Marsh Risk.

Strong capital base, greater underwriting uncertainty

Despite the broader threat spectrum, Marsh reported that the standalone terrorism market remains “stable and robust,” with (re)insurers typically able to offer per‑risk capacity of US$1 billion to US$4 billion depending on location and aggregation. Total capital across the US insurance and reinsurance sector considering all perils, including terrorism, was estimated at around US$1.2 trillion in 2025.

Meanwhile, Morningstar reached a similar conclusion on resilience, but warned that the current conflict in the Middle East is likely to increase underwriting uncertainty in global terrorism and political violence lines, particularly in the US and Europe.

“Hostilities in the Middle East will likely increase underwriting uncertainty in the global terrorism and political violence insurance markets. We believe that the insurance and reinsurance industry remains well positioned to absorb moderate terrorism and political violence losses because of its strong capitalization and diversified underwriting portfolios,” the ratings agency wrote. “Nevertheless, prolonged global geopolitical and military tensions may increase underwriting volatility, tighten reinsurance terms, and lead to more selective underwriting of politically exposed risks.”

Accumulation across lines now the central concern

Both Marsh and Morningstar stressed that the key issue is less the frequency of attacks and more how losses could aggregate across multiple classes.

“For insurers and reinsurers, the key issue is not only the probability of attacks but also how losses may accumulate across multiple insurance lines,” Morningstar DBRS said. Terrorism and political violence incidents can trigger concurrent claims in property, marine, aviation and business interruption covers, while state‑linked cyber operations against infrastructure or logistics networks may generate difficult‑to‑categorize losses.

As motives and methods blur, distinguishing between terrorism, sabotage, cyber incidents and acts of war is also expected to become more contentious, increasing the scope for coverage disputes where policies define these terms differently or exclude war‑related risks.

Marine and aviation markets are typically the first to feel the effects of geopolitical escalation as shipping routes and airspace are disrupted. Property, contingency and business interruption covers may then be hit by attacks on urban centers, commercial real estate and transport hubs, while cyber and specialty lines pick up secondary and tertiary impacts.

Morningstar noted that the main credit risk for insurers and reinsurers is “loss aggregation across multiple lines rather than a sharp increase in attack frequency,” particularly if a prolonged crisis affects multiple regions or choke points such as the Strait of Hormuz.

Rising demand and tighter terms for politically exposed assets

Demand for terrorism and political violence insurance usually rises during periods of geopolitical tension as businesses reassess exposures. Marsh and Morningstar both flagged heightened interest from organizations with assets in politically sensitive regions or high‑profile urban locations – including multinational corporates, airlines, logistics operators, infrastructure owners and hospitality groups.

These buyers are increasingly seeking broader political violence wordings that go beyond certified terrorism to include sabotage, riots, civil commotion, insurrection and politically motivated strikes. Coverage for high‑profile targets such as hotels, shopping centers, entertainment venues and transport hubs remains a particular focus given their combination of high insured values and public visibility.

Although catastrophic attacks are rare, the ratings agency noted that large‑scale events can still prove extremely costly for the sector. The US Federal Insurance Office estimated that the Sept. 11, 2001 attacks generated about US$59 billion of insured losses in 2024‑adjusted dollars, roughly two‑thirds of which were borne by reinsurers.

In recent years, competitive conditions and new capacity have put pressure on political violence pricing. Morningstar warned that a sustained geopolitical crisis could see insurers reassess accumulation and tighten terms, with politically sensitive assets facing higher premiums or lower limits. Reinsurers, including Munich Re, Swiss Re, Hannover Re and SCOR, are expected to play a pivotal role in determining available capacity and attachment points.

“If geopolitical tensions persist or escalate, reinsurers may respond by tightening underwriting standards, raising attachment points, or limiting capacity for certain high‑risk exposures,” the ratings agency said. That would push more risk back onto primary carriers and ultimately onto policyholders through higher premiums.

Government backstops remain a critical pillar

Public‑private terrorism pools remain central to market stability in several major economies. In the US, the Terrorism Risk Insurance Program (TRIP) provides a federal backstop for certified acts of terrorism once industry losses and retention thresholds are met. In the UK, Pool Re offers government‑backed reinsurance for commercial property terrorism losses and has expanded to include certain cyber‑triggered events. Similar schemes operate in markets such as France (GAREAT) and Germany (Extremus).

Morningstar noted that these mechanisms reduce the likelihood of a post‑loss withdrawal of capacity but typically apply only to certified terrorism, not broader acts of war or some forms of political violence.

Strong balance sheets but rising complexity

Overall, Morningstar concluded that most large global insurers and reinsurers “remain resilient amid heightened geopolitical risks,” supported by strong capital buffers, diversified underwriting and reinsurance protection. However, carriers with concentrated exposure to marine war, aviation or political violence books may face greater earnings volatility if hostilities persist.

For now, the terrorism and political violence market remains relatively specialized but well supported by international insurers and reinsurers. The challenge for the sector will be to manage rising accumulation and wording complexity, rather than a sudden surge in attack frequency, as geopolitical tensions and hybrid conflict continue to reshape the risk landscape.