Tuesday, June 21, 2005

Study: Terrorism insurance inadequate

Gaps in coverage could hamper efforts to restore the nation's economy after future attacks.

By Jeremiah Marquez / Associated Press

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LOS ANGELES -- Significant gaps in the nation's terrorism insurance program could slow efforts to revive the economy after future attacks, according to a study released Monday.

Many insurance policies protect against foreign terrorists, but don't cover losses caused by homegrown terror groups or even attacks involving chemical, biological, nuclear or radiological weapons, which are among America's top threats, a report by Rand Corp. finds.

Although scores of companies obtained coverage after a 2002 federal law freed up billions of dollars to help insurers pay claims, many businesses haven't bothered taking out policies. Terrorist coverage currently equals only half the amount of commercial assets protected by other insurance policies, said Bob Reville, co-author of the study by the California think tank.

Without insurance, a terrorist strike could heavily damage the economy because businesses would have trouble rebuilding and hiring again.

"Who would be paying out for compensation? Who would be paying for losses and rebuilding? There were would be a general industry slump that would feed into a downward spiral in the economy," said Peter Chalk, a Rand political analyst and co-author of the report. "We think it would be catastrophic."

The September 11 attacks hit insurance companies hard, costing them at least $32 billion in claims and prompting many to exclude terrorism from coverage.

Congress responded in 2002 by passing the Terrorism Risk Insurance Act to reimburse the insurance companies up to $100 billion should terrorists strike again.