Is Terrorism Coverage Adequate?

While governments in the United States, the United Kingdom andEurope have worked to improve terrorism insurance coverageavailability and affordability since the Sept. 11, 2001 attacks,more needs to be done, a U.K. consulting firm contends.

In the wake of the recent Madrid train station bombing,governments still “need to examine carefully whether existinginsurance arrangements can cope with the rising risk of man-madecatastrophe,” warned Oxford Analytica, based in Oxford,England.

Although the United Kingdom, Spain, France, Germany and theUnited States have adopted various schemes to provide for terrorismcoverage, Analytica said policymakers still need to “reassess theadequacy of existing insurance arrangements to withstand the shockfrom terrorist attacks.”

Analytica noted that in the United States, the private insuranceindustry remains largely responsible for losses under the thresholdlevel supported by the Terrorism Risk Insurance Act.

Although TRIA requires that terrorism coverage be offered on allprimary policies through 2004, insureds themselves elect whether topay for this option, and only 25 percent have done so, Analyticareported. Congress must decide later this year whether to extendTRIA.

In general, reinsurers operating in the United States haveexcluded terrorism from general catastrophe policies, although someoffer limited separate stand-alone policies, Analyticareported.

Reproduced from National Underwriter Edition, April 16, 2004.Copyright 2004 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.