Be careful what you wish for

On 26 November 2002, President Bush signed the Terrorism Risk Insurance Act of 2002 into law. The legislation provides for a temporary risk-sharing mechanism among the Federal government, insurers and insurance policyholders for insured losses arising from terrorist events. But according to Ted Collins , managing director at Moody’s Investors’ Service, the Act will have a moderately negative effect on the property and casualty industry. Mr Collins says that insurers, having avoided writing terrorism risks in the wake of 11 September, now find themselves in the somewhat ambivalent position of having their wish of federal intervention granted. He believes that the p/c industry still remains significantly exposed to terrorism risk; that the availability of coverage will increase, but costs will remain high; and that significant uncertainty surrounds the implementation and pricing of the coverage mandated by the Act.