The stand-alone terrorism insurance market has split into coverage for large cities, where prices are low, and suburban and rural areas in which brokers and insurers are seeing more interest, according to industry sources.

At the same time, expiration of the government’s terrorism insurance backstop in 2020 is becoming a more pressing concern.

An April report from A.M. Best Co. Inc. said that rate decreases for stand-alone terrorism insurance had begun to flatten. But the market is not homogeneous, making it difficult to generalize, other sources say.

“We generally feel rates are very challenging” for tier 1 business, said Ben Tucker, head of U.S. terrorism and political violence insurance in New York for XL Group Ltd., which does business as XL Catlin. Rates have gone so low that “they can’t really go any lower,” especially when putting out larger limits.

Downtown areas in major U.S. cities, such as New York and San Francisco, are generally viewed as tier 1 risks.

XL Catlin is typically quoting limits in the U.S. of between $50 million and $200 million, with the average limit bound at about $100 million, Mr. Tucker said.

“Tier 1 rates have sort of bottomed out,” said Tarique Nageer, terrorism placement and advisory practice leader for Marsh USA Inc. in New York. “For the last five to six years, every year the market has given back high single digits to low double digits, and eventually you get to a point where the cost of capacity can’t go any lower.”

Meanwhile, tier 2 and tier 3 business — the suburban and rural geographies that host mainly middle-market business — remains competitive and is drawing more interest from insurance buyers.

“We have seen more middle-market business than we had in the past” when considering the broker’s portfolio of new business since Jan. 1, said Wendy Peters, executive vice president of financial solutions-terrorism and political violence for Willis Towers Watson P.L.C. in New York.

“I would say that is definitely true,” said Jennifer Rubin, vice president for war, terrorism and political violence for Hiscox Ltd. in New York. “The suburban and rural areas still remain competitive. In tier 1 cities, while we’re not able to get price increases, we’re able to hold the line on expirations.”

“Non-tier 1, I think, is where the growth opportunity remains,” Mr. Nageer said.

Many of these tier 2 and tier 3 policyholders are reacting to changes in the nature of attacks, which often focus on inflicting mass casualties as opposed to substantial property damage, something noted by the Best report and many other sources.

“Clients’ appetites are shifting,” said Scott Bolton, Aon P.L.C.’s London-based director of crisis management. “The driver for that is people are beginning to see their exposure shift,” with changes in tactics and attacks, he said.

“Those clients which present the opportunity for mass casualty attack, those are the ones expressing more interest — retail, restaurants, transportation, hospitality, entertainment,” Mr. Bolton said.

“It can be schools, restaurant chains, sporting facilities, hospitals, educational systems and commercial real estate,” Mr. Nageer said. “We are seeing more interest coming from those entities.”

“The hospitality and gaming industries continue to grow, looking for additional capacity and coverage scope,” Ms. Peters said.

The shift in emphasis away from maximum property damage has created new priorities for buyers of terrorism coverage, sources said.

“They’re looking at mass casualty impact and thus looking for some nondamage trigger,” Mr. Bolton said. “There is a greater need on the business interruption side to understand how a client’s revenue may be exposed.”

“Nonphysical damage business interruption and loss of attraction cover is something we’ve also seeing a lot more interest in,” Ms. Peters said.

Terrorism cover has become a broader conversation for many policyholders.

“Five years ago, the terrorism conversation followed on the property conversation. It was a property loss issue,” Mr. Bolton said. “The impacts of terrorism are broader now. It’s not just a property conversation. There’s a casualty conversation out there reviewing how the casualty program will respond to the unanticipated impacts from terror attacks.”

As the market and its players shift and adapt to the changing terrorism landscape, another variable in the mix is the upcoming expiration of the Terrorism Risk Insurance Program Reauthorization Act of 2015, or TRIPRA, approved Jan. 7, 2015, and scheduled to expire on Dec. 31, 2020.

Even though the expiration is more than a year away, it is already beginning to affect the market. “We’re seeing more requests to get out to 2020 if they want to lock in the capacity now,” Ms. Ruben said.

The Best report noted that the government backstop, which was introduced after the Sept. 11, 2001, terrorist attacks in New York and Washington and has been renewed several times, sees a decline in protection with each renewal.

“I think the appreciation is growing of how more relevant stand-alone terrorism coverage is compared to TRIA for a lot of these organizations like schools, municipalities, and movies theaters,” Mr. Tucker said.