NU Online News Service

WASHINGTON--A Government Accountability Office report scheduled for release shortly concludes unequivocally that a terrorist attack using nuclear, biological, chemical or radiation weapons is uninsurable, National Underwriter has learned.

The report added that, "despite the attempts by private insurers to exclude NBCR risks, the marketplace remains significantly vulnerable to a catastrophic NBCR event for the insurance lines of workers' compensation, health, life and fire (following for property coverage in some states, where NBCR losses cannot be legally or practically excluded)."

Such a finding will support an initiative advanced by the American Insurance Association calling for continued government support for NBCR coverage once the Terrorism Risk Insurance Act federal backstop program expires.

The GAO report is being released amidst a flurry of activity this week by insurance industry advocates for an extension of TRIA beyond its Dec. 31, 2007 expiration.

Regarding NBCR, the GAO report said that a terrorist attack through such a means "largely fails to meet the principles of an insurable risk."

A summary of the report's major findings was obtained last night.

Specifically, the GAO said in its report that NBCR risks differ significantly from other types of risks because of the potential for large-scale catastrophic losses, the lack of knowledge pertaining to the long-term consequences of an NBCR attack, and a lack of historical experience with these types of catastrophic attacks on the United States.

"In fact, the GAO found that the potential severity of NBCR risks alone could diminish the willingness of some insurers to insure NBCR risk," the summary says.

The GAO report added that insurers have responded to the risks of catastrophic terrorism by trying to exclude NBCR coverage.

"The success of such exclusions for NBCR events have not been tested, and the likely result of any NBCR attack would mean an avalanche of litigation on the issue," the summary of the GAO report said.

The report added, according to the summary, that "most consumers may be unaware that they have little or no property-casualty coverage for these risks, and what coverage exists may be further narrowed if TRIA were to expire."

A group led by the Real Estate Roundtable is proposing another program that calls for the U.S. government to use premiums it would collect from an extension of TRIA to fund a pool structured as a mutual insurance company to provide a government backstop until the pool grew to $30 billion.

During the period the fund is building up, insurers would also be subject to deductibles and retention levels similar to those mandated by the current program.

The proposals by the Roundtable and the AIA are not mutually exclusive, an industry official said yesterday.

All of these issues will be aired at a hearing tomorrow on "Protecting Americans from Catastrophic Terrorism Risk" before the Capital Markets and Oversight Subcommittees of the House Financial Services Committee.

The GAO report was sought last year by Rep. Mike Oxley, R-Ohio, chairman of the full committee, after TRIA legislation was extended in a scaled-down format with few of the provisions that a House version of the bill contained.

The activity is taking place in anticipation that a report being prepared by the President's Working Group on Financial Markets concerning the potential viability of a private market for terrorism insurance and reinsurance will say such a market is potentially viable and the private market should be allowed to function when the current program ends.

The report is expected to be released by Saturday--as mandated by a provision of the law passed by Congress last December that extended the scaled-down version of the original TRIA program for two years.

Special Reports /

GAO: Nuke, Bio or Chemical Attack Uninsurable

Related Stories

Recommended For You