Many large US businesses will have no cover for terrorism risks when they renew their insurance policies during the year. The end of 2001 passed without the creation of any US state terrorism reinsurance facility, so the insurance industry has been left to deal as best it can with exclusions imposed by reinsurers.
According to Greg Doyle, executive vice president of reinsurance broker Guy Carpenter Inc., terrorism cover for major commercial programmes, especially landmark buildings and other property that could be a target for attack, is now excluded from reinsurance contracts. Reinsurance is generally available for terrorism exposures for personal lines and small businesses, although there may be strict limits.
However, two of the largest states, New York and California, have not agreed terrorism exclusions. Primary insurers there either have to take the terrorism risk net or walk away from the account altogether. P J Crowley, vice president of the Insurance Information Institute (III) believes that in many cases insurers will follow the latter course of action, so that there will be altogether less insurance available for traditional risks in these states.
With the Enron affair now preoccupying legislators, it is not clear when the government will next look at the proposals for a federal terrorism reinsurance facility. The US Senate last considered bill S1743, the National Terrorism Reinsurance Fund Act at the end of November and, although the Senate has resumed sitting after the Christmas break, the bill is not currently scheduled for further hearings.
Taking into account the range of estimates, the median loss prediction for 11 September is now about $45.3 bn. By mid-January, a total of 21,597 claims estimated at $14.5bn had been filed, according to the industry’s Disaster Insurance Information Office (DIIO). Of these claims, 13,233 are from commercial policyholders and 8,364 from individuals.
