Insurers creeping into terrorism coverage market

In the face of calls from U.S. President George Bush for a terrorism backstop plan to be approved by the Senate, insurers appear to be creeping back into the terrorism coverage market, albeit hesitantly.The latest is ACE USA, announcing it will offer commercial terrorism coverage in Canada and the U.S. The coverage is focused on commercial property accounts in the utility, telecommunications, manufacturing, entertainment, financial institution and real estate industries and provides coverage for physical loss or damage to insured property as a result of a terrorist act,” states a company press release. ACE is offering up to US$100 million in coverage.This would be “specialized” coverage, given the new terrorism exclusions being written into commercial policies renewed following the September 11. What was once coverage included in many commercial contracts will now have to be bought separately, and from a very small number of insurers.The ACE announcement follows another last week from a group of European insurers who intend to set up a terrorism vehicle for clients on that continent. Zurich Financial Services, XL Capital Ltd., Swiss Re, SCOR, Hannover Re and Allianz have established Special Risk Insurance and Reinsurance Luxembourg S.A. (SRIR) to offer limited coverage for physical loss damage on property. The company has total committed capital of EUR500 million.Nonetheless, insurers are not willing to commit to coverage for business interruption, liability and other damages beyond physical loss. SRIR’s founders say it is key to set clear parameters as to the acceptable form and level of risk insurers take on where terrorism risks are concerned.Insurers, while offering these new programs, are still pushing governments to offer some form of state-backed reinsurance coverage for terrorism losses.”The establishment of SRIR signals the confidence of the investors in the development of workable private solutions to the provision of terrorism cover,” states the group’s press release. “However, private solutions remain complementary to state sponsored schemes established prior to and since September 11, 2001 and are not meant to replace them.”ACE also notes that its product is “expected to complement any governmental response to terrorism coverage”.