Mr. Mead said he has been involved in “quite a few e-mail discussions” lately with people who are becoming “very concerned about which way the so-called terrorism reinsurance initiative” in Washington will go.

The insurance industry has put together a proposal for a state-chartered mutual carrier–Homeland Security Mutual Reinsurance–that would be backed up by the federal government. However, the Bush Administration and Congress have their own takes on the initiative, and time for government action is short with Congress set to adjourn soon.

Mr. Mead said there is concern among his members that “if terrorism coverage cannot be excluded, and if the government takes the position that its in the public interest for this coverage to be provided, some underwriters will then not offer any coverage on particular risks.”

As an example, he said owners of a highly visible piece of property such as the Sears Tower in Chicago could be denied coverage even if the government agrees to reinsure the terrorism exposure, but “requires the first layer of coverage to come from the building owners insurer. They may well find that nobody wants to write it.”

This was one of the topics scheduled for discussion this past weekend, he said. “I think where were coming from is that I dont think that CICA is the organization to support or endorse any specific proposal, but I do think were a good organization to start the discussion and get it out on the table, and try to formulate some solutions,” Mr. Mead explained.

One of the options–endorsing a single company's reinsurance solution–”becomes a tricky thing,” he said. “It may come out that one company gets a deal in Bermuda, so CICA could recommend that all captive owners do business with that company. Would that get its competitors moving? I dont know. Maybe it would. But I think it would be a disservice to our members if there are a half-dozen solutions out there and we pick one.”

He explained that, “if an organization stands up and says, were going to endorse [one companys] solution, they will have to deal with the fact that a lot of people are going to be unhappy with that. There is the counter position that if theyre unhappy, why dont they come up with a solution. Its entirely possible that CICA and other organizations might say If youve got a solution, were going to endorse it,” he said.

(For more on the effect the terrorism attacks might have on the captive market, see page 23.)

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, October 22, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

Contact Webmaster