Business Insurance Quotes
Congress warns of
Congressional investigators are warning that the lack of insurance for acts of terrorism could "slow economic recovery and growth," even if no further terrorist attacks take place.
In January, Rep. Michael Oxley, chairman of the House Financial Services Committee, called on the General Accounting Office (GAO) — the investigative arm of Congress — to study the economic ramifications of the availability and affordability of terrorism risk insurance.
"Because of the lack of terrorism insurance, some commercial lenders are not lending, and some commercial builders are not building."
According to GAO testimony at a Feb. 27 hearing before the Oversight and Investigations Subcommittee, the GAO found that "some financial problems are surfacing due to the lack of terrorism coverage."
Because they believe that they cannot accurately estimate the likelihood or cost of future terrorist attacks, insurers and reinsurers — which sell insurance to insurers — have been shifting the burden for acts of terrorism to policyholders through higher premiums and reduced coverage. This is leaving many businesses, especially those with high concentrations of employees or that are located in perceived target areas, unable to find "a meaningful level of terrorism insurance at an economically viable price," says the GAO.
Real estate companies and commercial lenders are especially hard hit and are beginning to find that some properties and businesses cannot be insured against acts of terrorism at any price. It is a situation that is likely to become worse as more insurance contracts are renewed over the course of the year, creating an "economic drag," says the GAO.
"Because of the lack of terrorism insurance, some commercial lenders are not lending, and some commercial builders are not building," says Rep. Sue Kelly, chairwoman of the subcommittee.
The GAO also warns that the economic burden of any future terrorist attacks would likely fall on policyholders and that even if the government were to intervene after a future attack, it would be faced with trying to help "without readily available claims-processing and payment mechanisms that exist in the insurance industry."
"The drag on the economy is real," says Oxley. "If the threat of terrorism continues, the problem may get worse before it gets better. Without a federal backstop to protect terrorism insurance, it may be a very long time before the marketplace can create full and available coverage."
Both Kelly and Oxley are calling on the Senate to pass legislation providing a federal backstop in case of a future terrorist attack to match the Terrorism Risk Protection Act, which was passed by the House on Nov. 29, 2001.