The American Academy of Actuaries, in response to questions posed by the President's Working Group on Financial Markets, has submitted its analysis on terrorism risk insurance, concluding that a national framework for terrorism risk is necessary if terrorism coverage is to be widely and readily available.
According to the report, the actuaries were not able to identify any insurance, reinsurance, or capital market solution that could finance such potential insured losses from a large chemical, nuclear, biological or radiological (CNBR) event. With their solvency threatened, insurers would be forced to limit their exposures to loss from a terrorist attack.
“A large CNBR terrorist attack on New York City could cause insured losses of $778 billion,” said Michael McCarter, chairperson of the Terrorism Risk Insurance Act subgroup. “Without a national framework for managing terrorism risk, insurers would be exposed to losses far greater than they could sustain, significantly damaging their ability to provide the ongoing insurance coverage that is essential to the stability of the entire economy.”
The Academy's analysis will assist the president's working group as it prepares a report about the long-term availability and affordability of terrorism insurance. The report is due to Congress by Sept. 30, 2006.
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