The September 11 attack on the World Trade Center has resulted in the largest losses ever to the insurance industry – an estimated $40 billion to $70 billion. Concerned about how to address this type of unpredictable and potentially severe exposure in the future, some business insurers have been imposing dramatic rate increases to recoup losses while asking Congress to provide a government-funded solution for the industry in case of future terrorist attacks.
So far, the New York Department of Insurance has received 52 terrorism exclusion requests and the New Jersey Department of Insurance reports 34 requests since mid-October. South Dakota has given conditional approval to permit the exclusion of terrorism coverage in policies covering small and midsize businesses – but only if federal lawmakers fail to act.
CUNA Mutual however is not ready to jump onboard the terrorism insurance exclusion wave just yet.
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According to CUNA Mutual Director of Public Relations Syd Lindner, "decisions regarding any possible changes to our coverages will not be made until we further understand the impact of any reinsurance changes and pending legislation."
"CUNA Mutual remains committed to providing industry-leading insurance programs and we are committed to our credit union policyholders," said Lindner. "We serve credit unions and their members only; their success is our success."
According to Consumer Federation of America Insurance Director Bob Hunter, "there's definitely gouging," and since September 11 some insurers have raised rates as much as 1,000%.
Hunter believes that individual home and auto policies or business policies covering mom-and-pop businesses should still cover terrorist acts.
Although a U.S. House of Representatives bill that would require insurers to cover the first billion dollars in future terrorism claims while allowing them to borrow from the government to cover 90% of the losses over $1 billion was blocked by the Senate, there may be hope yet. Before the holiday break the U.S. Senate was working on draft legislation that would have the government paying 80% of future terrorism losses under $10 billion and 90% of losses over $10 billion with no pay-back requirement.
With insurers looking for answers now the National Association of Insurance Commissioners, has released a loose guideline of sorts.
"Given Congress' failure to act, regulators will begin allowing insurers to exclude terrorism losses if a terrorist act causes total insured losses exceeding $25 million," said NAIC President and Iowa Insurance Commissioner Terri Vaughan. "Many policies have not been affected by terrorism exclusions. We urge financial institutions to remain calm and to discourage further market disruption. Only new commercial policies and those that are up for renewal might be affected by exclusions." [email protected]
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