Canadian risk managers push for government terrorism pool

As part of its lobby effort to persuade North American governments to back terrorism reinsurance, the Risk and Insurance Management Society (RIMS) recently asked Canadian members to comment on their views. Although confidential, the survey did show that Canadian RIMS members were concerned about the lack of available terrorism insurance since September 11, when reinsurers said they would not be offering the coverage to the primary market. Respondents also said that “the federal government needs to take action to ensure available and affordable terrorism insurance”, a RIMS press release states.
The responses have been forwarded to the Ministry of Finance, confirms Lloyd Hackett, Canadian director of legislative, risk management and public affairs for RIMS.
The Canadian report follows a U.S. study by the General Accounting Office (GAO) on the potential effects of a lack of available terrorism cover on corporate America. That report stated, “there are growing indications that some sectors of the economynotably real estate and commercial lendingare beginning to experience difficulties because some properties and businesses are unable to find sufficient terrorism coverage, at any price. If allowed to go unchecked, these difficulties are likely to increase as more insurance contracts come up for renewal over the next year. The resulting economic drag could slow economic recovery and growth.”
RIMS has been involved in discussion with both the Canadian and U.S. governments on the need for the government to step into the void left by reinsurers. They have also joined with the Insurance Bureau of Canada in its efforts to convince the Finance Ministry to devise a solution.
Hackett says that another issue being looked at is the “fire following” provision in policies, which covers fires that result from such things as terrorist acts. Insurers are compelled by regulation to offer the coverage, while reinsurers are not, and many reinsurers have lifted the coverage since September 11. In a statement published in “RIMSCAN” to Canadian RIMS members, Hackett notes that he hopes to see fire following coverage included in the government plan, along with such things as target property coverage, business interruption, and some lender’s interest exposure.