Dean R. O’Hare, Chairman and CEO of The Chubb Corporation, one of the world’s leading property and casualty insurers, told Congress that the insurance industry is strong and will be able to pay all claims resulting from the terrorist attack of September 11th.
Testifying before the House Financial Services Committee, O’Hare cautioned that the industry could weather the losses of September 11th but that a series of terrorist attacks or other catastrophes of similar magnitude would call into question the solvency of the insurance industry. “The industry has a specific amount of capital,” he said, “which cannot insure risks that are infinite and impossible to price.”
O’Hare said that Americans will demand increased coverage for terrorism-related risks. “Unfortunately, it is becoming apparent that as current reinsurance agreements expire, they will be renewed only with a terrorism exclusion, and therefore it will be impossible to provide our customers with terrorism coverage.”
It is believed that reinsurers will pay the majority of the estimated tens of billions of dollars of losses from the September 11th attack.
Chubb has estimated its own losses, net of reinsurance, at $500 million to $600 million pretax.
O’Hare called for Congressional action to form an insurance pool for terrorism coverage similar to the one that was formed in the United Kingdom following terrorist attacks related to the strife in Northern Ireland. The availability of insurance is essential to the recovery and growth of the economy, he said.