Insurer Legislative Outlook Gloomy

New York

Most top insurance industry officials doubt that Congress willestablish a federal terrorism reinsurance mechanism this year, anda third dont even believe such a program would boost terrorismcapacity to any great extent, a survey here revealed.

Seventy percent of those responding to a survey at last week'sProperty/Casualty Insurance Joint Industry Forum said that undercurrent circumstances, Congress would not pass legislation thisyear establishing federal participation in terrorism coverage.

On an even more pessimistic note, 35 percent said that even ifsuch a bill should pass, it would not “significantly increase theavailability of terrorism coverage.”

“Without a federal backstop, availability of insurance willcontinue to suffer,” according to Robert Hartwig, chief economistand senior vice president of the New York-based InsuranceInformation Institute, one of nine p-c organizations co-sponsoringthe forum. “It will also take longer for the industry to build thecapital and confidence to underwrite this new risk, which will havean impact on the broader economy for at least the next year.”

An overwhelming number of respondents–ninety percent–are alsoconvinced there is no chance that Congress will pass and PresidentGeorge W. Bush will sign legislation this year that “will helpcontain the current asbestos crisis.”

Respondents were similarly pessimistic about the chances fortort reform, with 72 percent saying that they do not expect anyprogress in this area this year.

However, a little more than half–54 percent–said they expectsome progress in the fight against insurance fraud this year.

Meanwhile, 75 percent said they expect the pace of convergencein financial services to slow down in 2002.

The survey also showed that insurance industry leaders are verybullish about the prospects for higher rates and improvedprofitability in the year ahead, although analysts here warned thata rapid influx of capital could quickly short-circuit the hardeningmarket–that is, unless a catastrophe hits, especially anotherterrorist attack. (See story, bottom of page 5.)

Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, January 21, 2002.Copyright 2002 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.

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