“I was misinformed.” That line from “Casablanca” was apparently echoed last week with the announcement that Allianz and its five partners had decided to shut down their Luxembourg-based terrorist risk insurance operation, Specialist Risk Insurance and Reinsurance Luxembourg S.A. (SRIR), due to the lack of demand for its products.
“SRIR was set up in 2002 to provide property coverage against acts of terrorism. The aim was to cover a gap in the market following September 11, 2001, when terrorism coverage for a time all but disappeared. SRIR’s business was focused on European companies and their worldwide operations,” Allianz said in a statement. However, “the shareholders of SRIR have decided to close down the specialist insurer due to insufficient market demand for their products.”
Allianz, Hannover Re, Swiss Re, XL Capital Ltd and Zurich Financial Services each had roughly 18 percent stakes in SRIR. France’s, SCOR had a 9.1 percent stake. The company has an authorized capital of 500 million Euros ($552.5 million), and an issued capital of 300 million Euros ($331.5 million). Allianz Global Risks CEO Steve Schleisman is chairman of SRIR’s board of directors.
The announcement noted that “Despite the fact that there is greater awareness and knowledge of terrorist risk, market demand did not meet company expectations.” CEO Alan May observed that “The syndrome ‘I am not a terror risk’ certainly prevails.
Other factors influenced the decision as well including; “the increasing availability of terrorism coverage from the general and reinsurance industry, the emergence of government supported programs, and rapidly changing market terms and conditions.”
Allianz said it does not expect the closure to have a significant effect on its overall earnings. Schleisman indicated “it’s regrettable that there wasn’t sufficient client demand. Our own strategy at Allianz dictates a strict course toward profitability. The decision to close SRIR underlines this.”
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