Terrorist attacks south of the border are sending reverberations through the Canadian p&c industry, says analyst Ted Belton, author of the Belton Report. In his third quarter analysis, Belton notes that prior to the attacks market hardening was predicted to be a “soft landing”. “It was expected that across-the-board premium increases would be relatively modest and heavy increases would be imposed on individual risks which had produced poor results or had become severely underpriced.” However, since the September 11 terrorist attacks on the World Trade Center (WTC) and Pentagon, the industry has taken swift action on rate increases, and this is no less true in Canada than the U.S. “In spite of the fact that WTC claims will have little direct impact on most insurers in Canada, underwriters are acutely aware that reinsurers and retrocessionaires will be limiting or completely withdrawing coverage for terrorist acts and, to replenish lost capital, will impose premium increases that one reinsurance broker describes as “scary”,” he notes. This effect has trickled down to the primary market, where, as one broker tells Belton, the reaction of insurers has been “brutal”. While some commercial properties considered potential terrorist targets are having difficulty finding coverage, other risks are being priced at double or even triple the premium since September 11. Belton also finds it ironic that prior to the attacks, the industry’s soft market conditions were being blamed on the over-abundance of capital. “Now shareholders are being required to replace capital that has been wiped out by WTC claims.” Regulators and rating agencies are also taking a hard look at insurer reserves.