Last fall, soon after the Sept. 11 attack on the World Trade Center, the nation's insurance companies, supported by bankers, builders and real estate companies, warned that if Congress did not shield insurers from losses in future attacks, terrorism coverage would vanish and the economy would grind to a halt.
But Congress did not act. Now, two months into the new year, the consequences appear to be far milder than the insurers suggested.
Commercial insurance costs in general have risen steeply, and terrorism coverage, still extremely limited, is particularly expensive. But there is growing evidence that American businesses and their insurers are solving their problems without Washington's help.
Terrorism coverage, which was unobtainable immediately after the attacks, is becoming more widely available and in larger amounts. Premiums are falling as more insurers enter the market.
So what of the dire predictions? The proponents of government intervention, which include Bush administration officials, maintain that hard times are coming -- that calamity has simply been slow to develop. They say the lack of full terrorism coverage at reasonable prices is creating a drag on the economy, the effect of which may not be felt for months.
"This is a slow-moving glacier that will destroy everything in its path," said Stephen Bartlett, the president of the Financial Services Roundtable, an association of some of the largest insurers and banks.
The General Accounting Office, the investigative arm of Congress, echoed those concerns in a report released Tuesday afternoon. The report, requested by Representative Michael G. Oxley, R-Ohio, the author of legislation providing for government assistance that has so far succeeded only in the House, cited nine examples across the nation of unidentified commercial property owners being unable to get full or partial terrorism coverage or being unwilling to pay what insurers were asking. A congressional hearing on terrorism coverage is scheduled for Wednesday afternoon.
But Congress' interest in the issue has generally cooled as it has become preoccupied with the Enron debacle, and major business disruptions have yet to occur. Many insurers said they doubt that, barring another major attack, any help will be coming from Washington.
Some in Congress still say that they favor government intervention, but no action is scheduled.
Sense of urgency wanes
"The air has been taken out of the balloon," a Democratic staff member in the Senate said. "The urgency doesn't seem to be there. We're now into February, and we don't seem to have a major problem."
More than a dozen entrepreneurial insurance companies are now collectively offering up to US$500 million in coverage per building. This is less than the cost of replacing the tallest buildings, but more than enough for most commercial properties. The policies cover physical damage to property from terrorism and, in some cases, loss of business income.
Dazzled by the enormous premiums that terrorism coverage is generating -- sometimes 10 or 20 times basic commercial property insurance -- several other insurers, including Allianz of Germany, Swiss Reinsurance and Zurich Financial Services, are considering offering it.
"They're looking at this as a new product line to grow their revenue," said Gary Mathieson, a senior executive at Willis Group Holdings, a big insurance broker.
RSS