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Posted by tonyb on December 06, 2001 at 14:06:48:
Thursday, December 6, 2001
Nation's insurers dropping coverage of acts of terrorism
By Don Thompson
SACRAMENTO -- The nation's insurers are raising rates and cutting their coverage of future acts of terrorism following the Sept. 11 East Coast attacks, representatives told a California legislative panel Wednesday. The insurance industry can absorb the estimated $30 billion to $70 billion in losses from the attacks, but additional terrorist acts "would be devastating to the industry," said Peter Gorman, vice president of the Alliance of American Insurers. A nuclear attack, for instance, would bankrupt the industry, he told the Assembly Insurance Committee. That's why insurers are lobbying Congress to create a new insurance fund, even as insurers exempt acts of terrorism from coverage in the same way they used to exempt acts of war, Gorman said.
If Congress doesn't act, he said, California may need to create a state terrorism insurance pool, similar to the pool it created to handle claims from the 1994 Northridge Earthquake. A big part of the problem is that insurers can't predict losses from future acts of terror in the way they have been able to prepare to cover losses from natural disasters like earthquakes or hurricanes, he said. Congress needs to create a uniform definition of terrorism as well, to prevent insurers from excluding less-catastrophic events such as hate crimes and arsons that have traditionally been covered, testified California Insurance Commissioner Harry Low. Matt Mosher, a vice president at insurance analyst AM Best, said he expects insurance prices will spike through next year before leveling out in 2003.
He and Brad Kading, senior vice president and director of state relations for the Reinsurance Association of America, said they expect the current unsettled insurance market to level out within a year or so, barring additional terrorist assaults.
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