Editor’s Note: Terror Strike Again
Recently I attended the National Symposium on the Future of Terrorism Risk Insurance. The day-long symposium, which took place on the campus of the University of Southern California, featured experts from several different perspectives on terrorism insurance. Much of the day was spent talking about two things: the possible renewal of TRIA and the potential terrorism threats against the United States and its Western Allies (see page 121).
The London bombings (see page 10) struck eerie to me as it was on Thursday morning, June 7, that I was just putting the finishing touches on my story based on the Terrorism Symposium. I couldn’t help but recall all of the things said about the future of terrorism and how much of it coincided with the attacks on London.
Panelists emphasized the reconfiguration of the Al-Qaeda organization and the new trends in terrorism strikes-which was illustrated perfectly by the London bombings. No longer are huge, heavily protected landmarks a target (such as the World Trade Center and the Pentagon), the strikes are now targeted against “soft targets”-in this case, mass transit, which carries hundreds of thousands of civilians everyday.
The sad thing is, the threat of terrorism is not going to go away anytime soon. Perhaps what is worst, at least for the insurance industry, is that the U.S. Government is seemingly leaving a terrorism backstop to the industry’s own devices (see page N2). With TRIA now set to expire in December 2005, the industry is faced with a big problem.
According to the Treasury Department’s report, insurers are expected to adopt terror coverage exclusions permitted by most states-except for New York, Florida and Georgia. The report suggested that, once TRIA’s sunset is finalized, insurers might decide to raise premiums on the same coverage, purchase extra reinsurance, limit coverage, or raise extra capital to cover exposures.
My favorite part of the report is the following quote: “Overall, our assessment is that the immediate effect of the removal of the TRIA subsidy is likely to be less terrorism insurance written by insurers, higher prices and lower policyholder take-up.” Given the recent terrorist activity in London, at this point, TRIA’s expiration is simply a recipe for disaster.
I wonder-would the Treasury Department still have recommended TRIA’s expiration if the London bombings had occurred before the report came out? Something tells me they may have given the bombings at least strong consideration before making their decision.
What do you think about the Treasury Department’s findings? I welcome your comments at cbeisiegel@insurancejournal.com.