Demand for insurance cover against the risk of terrorism has increased substantially since the September 11 attacks in the United States, according to a leading insurer. American International Group (AIG) has reported a sharp increase in sales of political risk insurance in the past few weeks. This type of insurance covered policyholders from losses they might suffer from terrorist attacks or wars in countries in which they operate, said Daniel Wagner, regional manager of political risks of AIG's general insurance arm, American International Underwriters. It also covered losses due to changes in government policies, such as the sudden cancellation of licences granted to foreign investors, or when countries suddenly imposed capital control measures. Mr Wagner said companies usually purchased political risk insurance when they were investing into countries where the political situation was unstable. But since the September 11 attacks, companies investing in advanced markets also wanted to take political risk insurance due to fears of terrorist attacks in those countries, Mr Wagner said. 'After the World Trade Centre incidents, people are more aware of the risks of terrorist attacks,' he said. Mr Wagner said it was inevitable insurers worldwide would charge clients more for policies as the insurance sector had suffered huge losses from the attacks. Insurers are estimated to face claims amounting to US$30 billion to US$40 billion. 'Rates across all related lines of insurance are very likely to harden quickly,' Mr Wagner said. Whether political risk cover would also become more expensive would depend on whether the countries in which the companies were seeking cover were in danger of terrorist attacks. Mr Wagner said in Asia, Indonesia and the Philippines had been top of the list of countries where investors wanted to have such insurance, due to their uncertain political situations. Since the attacks, Indonesia was still top as there were many protests in the Islamic state opposing the US strikes on Afghanistan. Although China was not a prime target of terrorists, he believed there would be increasing demand for political risk insurance to cover their operations in the next few years. This was because many more foreign companies would want to invest in China after its World Trade Organisation entry.