The terrorist attacks in London are expected to be covered by the nation's Pool Reinsurance Company, drawing a stark contrast to the potential for the expiration of the federally-provided "safety net" of the Terrorism Risk Insurance Act.
Although the attacks are a tragedy for the victims, Lehman Bros. analyst Jay Gelb said in a note to investors that insurer's losses from the attacks "should be limited" because of the Pool Reinsurance Company, which is also known as "Pool Re."
Established in 1993 to help insurers manage terrorism risk mostly related to the Irish Republican Army, Pool Re is a government program that maintains a reinsurance pool all members of the pool pay into. Should the losses from a terrorist attack go beyond the pool's reserves, the British Treasury assumes the costs and recoups the funds through later charges on insurers.
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