Terrorism Insurance: Rising Uninsured Exposure to Attacks Heightens Potential Economic Vulnerabilities Statement of Richard J. Hillman Director, Financial Markets and Community Investment, Testimony before the Subcommittee on Oversight and Investigations, Committee on Financial Services, House of Representatives [open pdf - 196KB]
The tragic events of September 11, 2001 brought to light the huge potential exposures insurance companies could face in the event of another terrorist attack. Faced with continued uncertainties about the frequency and magnitude of future attacks, at the same time government and military leaders are warning of new attacks to come, both insurers and re-insurers have determined that terrorism is not an insurable risk at this time. As a result, in the closing months of last year insurers began announcing that they could not afford to continue providing coverage for potential terrorism losses. The effects of this trend have yet to be fully realized, but there is some indication that it has begun to cause difficulties for some firms in certain economic sectors. My statement today is based on discussions with a variety of insurance industry participants, regulators, policyholders, and other affected parties. Because many companies were deeply concerned about the possibility that their difficulties in getting terrorism coverage might become general knowledge, they spoke to us only on condition of anonymity. Finally, my statement primarily addresses the availability of terrorism insurance coverage.
Government Accountability Office (GAO): http://www.gao.gov/