Insurance Industry Says It Might Not Cover Future Terrorist Attacks

Dec. 6, 2001
Representatives from the insurance industry testify in California that despite their quick response to Sept. 11, they might not be able to cover the cost of future terrorist attacks.

The insurance industry has been quick to respond to the Sept. 11 terrorist attacks in New York, Washington, D.C., and Pennsylvania, but the victims of any future attacks might not be so lucky, representatives of the insurance industry yesterday told members of the California Assembly Insurance Committee. The committee members wanted to know what the industry''s response would be if a terrorist attack like the ones in New York or Washington occurred in California.

Insurance representatives noted that the Sept. 11 attack was unique in several ways: It was the largest insured loss from a man-made disaster and it deeply impacted all lines of coverage - including property and casualty, workers'' compensation and life insurance.

"Despite personal losses, the insurance industry responded immediately to the attack by dispatching hundreds of personnel to Ground Zero," noted Diane Colborn, vice president of legislative and regulatory affairs for the Personal Insurance Federation of California.

"Insurers were processing and paying claims on day one and will continue to assist policyholders as long as necessary from their catastrophe vans in Battery Park,'''' Colborn added.

She said that insurers are processing more than 19,000 claims so far and that the number of claims is growing daily. She estimates that the total insured losses could reach a staggering $30 to $70 billion.

"As the country moves forward we must plan and prepare for future terrorist attacks," said Mark Webb, American Insurance Association (AIA) state affairs vice president. "Reinsurers and primary insurers are no longer able to offer coverage for terrorism. Businesses in Visalia and Chicago are all potentially at risk for terrorism."

Insurers cannot absorb this infinite risk with their finite resources, Webb told lawmakers, adding, "The industry cannot accurately predict loss, plan reserves or price their product. It is vital that Congress enact a federal mechanism to restore predictability and give insurers the tools necessary to return to the terrorism insurance market."

The attacks on September 11 "[were] the largest disaster in history for life and workers'' compensation insurers," said Janine Gibford, legislative advocate for the Association of California Insurance Companies. She noted the risk associated with Sept. 11 was spread across all lines and several companies and no one entity took the brunt of the losses. The industry is well capitalized, she said, and will be able to "quickly and fully" meet the needs of policyholders.

"No insurance company has invoked exclusions for war or acts of terrorism. The financial questions facing the industry are about future claims, not claims resulting from Sept. 11," Gibford noted.

by Sandy Smith ([email protected])

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EHS Today's editorial staff includes:

Dave Blanchard, Editor-in-Chief: During his career Dave has led the editorial management of many of Endeavor Business Media's best-known brands, including IndustryWeekEHS Today, Material Handling & LogisticsLogistics Today, Supply Chain Technology News, and Business Finance. In addition, he serves as senior content director of the annual Safety Leadership Conference. With over 30 years of B2B media experience, Dave literally wrote the book on supply chain management, Supply Chain Management Best Practices (John Wiley & Sons, 2021), which has been translated into several languages and is currently in its third edition. He is a frequent speaker and moderator at major trade shows and conferences, and has won numerous awards for writing and editing. He is a voting member of the jury of the Logistics Hall of Fame, and is a graduate of Northern Illinois University.

Adrienne Selko, Senior Editor: In addition to her roles with EHS Today and the Safety Leadership Conference, Adrienne is also a senior editor at IndustryWeek and has written about many topics, with her current focus on workforce development strategies. She is also a senior editor at Material Handling & Logistics. Previously she was in corporate communications at a medical manufacturing company as well as a large regional bank. She is the author of Do I Have to Wear Garlic Around My Neck?, which made the Cleveland Plain Dealer's best sellers list.

Nicole Stempak, Managing Editor:  Nicole Stempak is managing editor of EHS Today and conference content manager of the Safety Leadership Conference.

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