Six years after September 11, 2001, the threat of terrorist attack remains a source of tremendous uncertainty for the United States economy, with potentially negative consequences for both business interests and employment, according to the Insurance Information Institute (I.I.I.).
“Besides killing almost 3,000 individuals, the terrorists also sent economic shock waves throughout the U.S. economy,” said Dr. Robert Hartwig, president of the I.I.I.
Hartwig said the industry has paid September 11-related claims totaling $31.6 billion. Adjusted for inflation, insurers paid the equivalent of $35.9 billion in September 11 claims in 2006 dollars, the I.I.I. estimates.
“With many realistic attack scenarios producing losses several times that of September 11, it is essential that a long term terrorism risk insurance program be enacted,” Hartwig said. “Implementation of such a measure is a key component of the nation’s effort to protect the financial homeland. Congress is considering an extension which will protect millions of businesses and their workers. It also addresses the potential ambiguity of domestic versus international terrorism acts.”
The Terrorism Risk Insurance Revision and Extension Act of 2007 (TRIREA) has to date won support in the U.S. House of Representatives, and will also need to win approval from the U.S. Senate and the president before it goes into effect. The current federal law governing terrorism insurance expires on Dec. 31, 2007.
According to Hartwig, a long term terrorism risk insurance program’s benefits will be felt immediately and will affect virtually every segment of the economy.
“Businesses in cities and towns, large and small, from coast to coast would under this proposal be able to purchase terrorism risk insurance more readily, secure in the knowledge that the protection will remain available for many years to come,” he said. “It should be particularly beneficial to the construction, commercial real estate, manufacturing, and utility and transportation industries. Governments that own and operate critical infrastructure such as airports, ports and bridges will also benefit.”
But he expressed concern over the inclusion of a provision that would compel insurers to cover nuclear, biological, chemical and radiological (NBCR) risks. “NBCR risks pose unique threats which have in the past not been covered by standard property/casualty insurance policies. Insurers have little to no experience insuring against these risks, the magnitude of which can easily exceed the claims-paying resources of private insurers, even with TRIREA in place,” he warned.
Source: Insurance Information Institute
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