Aon: More than Half of Companies Studied Decide to ‘Take Up’ Some Kind of Terrorism Insurance

With the “new reality” created by the terrorist acts of Sept. 11, 2001, companies throughout the globe faced a new set of issues in managing the broad spectrum of risks created by these events.

In a study released Wednesday by Aon, the organization found that 57 percent of companies studied have decided to “take up” some kind of terrorism insurance – an increase over the 24 percent found earlier this year.

An Aon White Paper analyzes the terrorism coverage available in detail, and the company issued a call for added emphasis to renewal of the Terrorism Risk Insurance Act (TRIA), which, without action by the US Congress, will expire on Dec. 31, 2005.

TRIA ostensibly created a new line of insurance cover, providing three-
year federal “back stop” reinsurance up to an aggregate limit of US$100 billion, and requiring insurers to make TRIA coverage available to policyholders.

Gary Marchitello, managing director in Aon’s National Property Syndication group in New York, noted, “It should come as no surprise to the industry that the coverage offered through TRIA has become increasingly desirable for business. However, we are facing a watershed year for this coverage. With the possible expiration of TRIA, Capitol Hill and the insurance industry cannot afford to postpone efforts to renew TRIA or create a similar mechanism to manage the global terror risks the ‘new reality’ has created.”

The study offers some serious commentary on the future of TRIA. In part, the study states: “TRIA’s importance as a backstop cannot be overstated. Its expiration will cause an immediate and significant diminution of the available supply of terrorism capacity that is likely to leave the market hard pressed, if not unable, to meet the potential demand for risk transfer capacity.”

The analysis also finds that terrorism risk coverage has become more
affordable. The study states: “After the chaotic rollout of TRIA, with its
attendant pricing confusion, a more rational market has fostered rational decision making.”

The white paper from Aon, “Terrorism Risk Management & Risk Transfer Market Overview,” is available for clients and markets. Those interested in receiving a copy can visit http://www.aon.com .