Moody's: Law Fails to Boost Terrorism Coverage

The Terrorism Risk Insurance Act of 2002, which created a federal government backstop for terrorism insurance, has not increased terrorism insurance coverage at reasonable prices according to a report from Moody's Investors Service.However, the rating agency finds that prices have "abated somewhat" from the heights to which they rose in the immediate aftermath of 9/11. Based on a survey of U.S. primary insurers, the rating agency reports that as of April 2003, few insurance carriers were offering coverage of domestic acts of terrorism (which are not covered by the TRIA) or selling "stand-alone" terrorism policies. Also, the rating agency found that no insurer is offering "broad coverage of nuclear, biological, or chemical acts of terrorism." James Bartie, a vice president/senior analyst with Moody's property & casualty and reinsurance group, said, "Overall, the act does not yet seem to have increased the availability of terrorism insurance coverage at prices that most buyers would view as reasonable." He added that some insurers have quoted "extremely high prices for some types of risk" to discourage policyholders from getting the coverage in cities that are considered "highly vulnerable" to future attacks. The rating agency is also concerned that some insurers are viewing the TRIA as a "substitute for sound risk management."