U.S. Program to Support Private Insurers Leads More Companies to Buy Terrorism Insurance

A U.S. program to protect insurers against paying out enormous damages following a terrorist attack has helped to expand the number of U.S. companies that buy terrorism insurance, the U.S. Treasury Department said yesterday (see GSN, Dec. 8, 2005).

In a report on behalf of the President’s Working Group on Financial Markets, the department said that 58 percent of U.S. companies now have insurance to cover damages resulting from terrorist attacks.  That percentage has risen from 27 percent in 2003 and from virtually zero before the Sept. 11, 2001, attacks, the New York Times reported (see GSN, Aug. 5, 2005).

The costs of terrorism insurance have dropped significantly, the report says, as more companies have participated.

Under a federal program created in 2002, insurers are required to issue coverage for most terrorist attacks, although they are exempted from insuring nuclear or biological weapons attacks because the costs are considered to be astronomical.

The Treasury report says there is “little potential for future market development” by private insurers to cover the losses of such attacks, according to the Times.

The current federal program, intended to serve as a temporary measure to support the industry while it develops more insurance tools, calls for the federal government to shoulder most of the costs up to $100 billion following an attack. 

The program is due to expire next year, but the insurance industry is lobbying to have it extended.

“Too much about an attack remains uncertain,” said Robert Hartwig, chief economist of the Insurance Information Institute.  “And that makes the long-term involvement of the government in terrorism insurance absolutely essential” (Joseph Treaster, New York Times, Oct. 3).

Back to top
About Newswire  |  Contact National Journal  |  Re-Use Guidelines © Copyright 2008 by National Journal Group, Inc. The material in this section is produced independently for NTI by National Journal Group, Inc. Any reproduction or retransmission, in whole or in part, is a violation of federal law and is strictly prohibited without the consent of the National Journal Group, Inc. All rights reserved.