SEC Mulls Terror Coverage Disclosure

By Steven Brostoff, Washington Editor

NU Online News Service, Feb. 6, 2:12 p.m. EST, Washington?The U.S. Securities and Exchange Commission is considering whether to require businesses that do not have terrorism insurance to disclose that fact to investors, Reuters Newswire reported late yesterday.

Reuters quoted SEC Chairman Harvey Pitt as telling reporters that it is an issue the SEC has to examine in the aftermath of the Sept. 11 tragedy, and is on the agenda of the SEC's Division of Corporate Finance.

Mr. Pitt was quoted as saying that the issue could be addressed by either providing additional accounting guidance to corporations or by issuing a formal regulation, although no decision has been made.

Rodger Lawson, president of the Alliance of American Insurers, Downers Grove, Ill., praised Mr. Pitt's statement, calling it "absolutely appropriate and necessary."

Mr. Lawson said that insurance is fundamental to the financial security of business and essential to making markets work. If insurance is not available, he said, markets will not work as well.

There is an increased risk of terrorism since the Sept. 11 attacks, Mr. Lawson said. While everyone hopes there will be no attack, he said, there is an increased sense of awareness and concern.

Moreover, Mr. Lawson said, in the wake of the Enron debacle, investors and consumers will demand information on the availability of terrorism insurance.

Regarding the impact of Mr. Pitt's announcement on pending legislation creating a federal role in the terrorism reinsurance market, Mr. Lawson said it is critical that members of Congress and the administration understand the severity of the issue.

He noted that many questions have been asked about the "sky falling" on Jan. 1, 2002, and these questions have been used as an excuse for not adopting the legislation.

However, Mr. Lawson characterized the problems in the terrorism reinsurance market as "rolling thunder."

Requiring disclosure of the absence of terrorism insurance would make it clear that there is a problem and that Congress needs to act and act quickly, Mr. Lawson said.

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SEC Mulls Terror Coverage Disclosure

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