SEC Mulls Terror Coverage Disclosure

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By Steven Brostoff, Washington Editor

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

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

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Mr. Pitt was quoted as saying that the issue could be addressedby either providing additional accounting guidance to corporationsor by issuing a formal regulation, although no decision has beenmade.

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

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Mr. Lawson said that insurance is fundamental to the financialsecurity of business and essential to making markets work. Ifinsurance is not available, he said, markets will not work aswell.

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There is an increased risk of terrorism since the Sept. 11attacks, Mr. Lawson said. While everyone hopes there will be noattack, he said, there is an increased sense of awareness andconcern.

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

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Regarding the impact of Mr. Pitt's announcement on pendinglegislation creating a federal role in the terrorism reinsurancemarket, Mr. Lawson said it is critical that members of Congress andthe administration understand the severity of the issue.

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

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

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

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