Terrorism Insurance in the Post September 11 Marketplace [Updated December 7, 2001] [open pdf - 54KB]
The insured losses from the terrorist attacks of September 11 are currently estimated to total as much as $70 billion, the largest insured catastrophic loss in history. Although the insurance industry has committed, and appears able, to pay losses resulting from the attacks, it has also warned that it would not be able to absorb such major losses from terrorism in the future. Reinsurers are saying that due to their inability to quantify, underwrite, or price for the escalation of terrorism risks, they will not accept them in future reinsurance contracts. Without this backup reinsurance capacity, primary insurers maintain that they have no choice but to specifically exclude terrorist coverage in all of their future commercial insurance policies. The lack of terrorism coverage after that date could impede the ability of financial services providers to finance commercial property acquisitions and new construction projects. As a result, Congress is considering a temporary government-industry risk sharing program until the private marketplace can adapt to provide the needed coverage.
CRS Report for Congress, RS21075