What’s New: In brief (October 03, 2006)

The US President’s Working Group (PWG) on Financial Markets has submitted its report on terrorism risk insurance that does not endorse an extension of the federal terrorism insurance financial backstop created by the Terrorism Risk Insurance Act (TRIA) in 2002. In a cover letter to the report Treasury Secretary Henry Paulson says TRIA has supported “a continued increase in private-sector participation in the terrorism risk insurance marketplace.” However, he adds that, “TRIA was not intended to be permanent, but rather was intended to help stabilize the insurance industry,” Paulson says. The Act has been successful and Paulson says the proof is that the insurance industry is currently in a better position than it was after September 11,2001, in terms of both financial health and understanding of overall terrorism risk exposures. The PWG’s report claims that TRIA’s subsidized federal reinsurance negatively affects the emergence of private reinsurance capacity because “it dilutes demand for private-sector reinsurance.” The Terrorism Risk Insurance Extension Act of 2005 will currently expire on Dec. 31, 2007, however the report says “while state regulations have the potential to significantly interfere with the operation of the insurance markets, it does not appear that such restrictions have had a significant impact in the market for terrorism risk insurance in the post-TRIA environment” and as such a further extension is not endorsed. The report suggests however there is room for future market development in covering chemical, nuclear, biological and radiological terrorist risks.

Hub International Ltd. (TSX: HBG) has acquired Kaufman & Kaufman Insurance, an independent Salt Lake City, UT-based brokerage specializing in transportation-related coverage. With this acquisition, HUB says it will expand its specialized transportation insurance brokerage and will establish a specialty hub headquartered in Salt Lake City, with Dale Kaufman as president. Financial terms of the transaction were not disclosed. Martin P. Hughes, HUB’s chairman and chief executive officer says the acquisition will increase the Company’s national transportation market share as well as its regional penetration in western US.