Commercial property-casualty insurers in general still remain unwilling to provide nuclear, biological, chemical and radiation (NBCR) coverage under the Terrorism Risk Insurance Act due to uncertainties about the risk and the degree of catastrophic loss, the Government Accountability Office said.

In a report released today, the GAO said that insurers rely on long-standing standard exclusions for nuclear and pollution risks, “although such exclusions may be subject to challenges in court because they were not specifically drafted to address terrorist attacks.”

Companies that own high-value properties in large cities are among those policyholders who cannot obtain NBCR coverage, the survey found.

At the same time, workers' compensation, group life and health insurers generally provide such coverage because states do not allow them to exclude those risks, the report said.

The report was mandated by a provision of the Terrorism Risk Insurance Act extension that was enacted into law last December, which extended the program through 2015.

Efforts were made to expand the program to mandate specific coverage of NBCR, but a study of the issue was all that made it into the final bill.

The study is based on inquiries in six geographic markets: Atlanta, Boston, Chicago, New York, San Francisco and Washington, D.C.

Commercial p-c insurers apparently remain unwilling to offer NBCR coverage because of uncertainties about the risk and the potential for catastrophic losses, according to industry participants, the GAO said.

Insurers are unwilling to provide the coverage because they “face challenges” in reliably estimating the severity and frequency of NBCR attacks for several reasons, including accounting for the multitude of weapons and locations that could be involved (ranging from an anthrax attack on a single building to a nuclear explosion in a populated area) and the difficulty or perhaps impossibility of predicting terrorists' intentions.

“Without the capacity to reliably estimate the severity and frequency of NBCR attacks, which would be necessary to set appropriate premiums, insurers focus on determining worst-case scenarios (which with NBCR weapons can result in losses that would render insurers insolvent),” the report said.

The report also cautioned that workers' comp, group life and health insurers that generally cannot exclude NBCR coverage from their policies also face challenges in managing these risks.

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GAO Report Says Insurers Not Offering NBCR

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