Canadian Underwriter

Risk reduction only response to terrorism threat: LOMA study

April 14, 2004   by Canadian Underwriter

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A new study of emerging risks shows life & health insurers dealing with the threat of man-made catastrophes along with their property & casualty counterparts. The study, by international insurance research organization LOMA, concludes that insurers have a role to play in ensuring emerging risks are mitigated, including promoting government intervention.
Specifically, the report looks at the threat posed by terrorist acts involving nuclear or biological weapons on life and health carriers, as well as companies covering property, workers’ compensation and other risks.
“Because the transfer of many of the risks described in this report expose the insurance industry to potential financial ruin, risk reduction and avoidance are the only long-term risk management solutions,” the report notes.
One way to achieve this is for insurers to address risk concentration, as well as disaster recovery planning (including for technological disasters).
However, the report notes, a major terrorist attack on the scale of 9/11 would leave insurers vulnerable regardless of the proper planning and spread of risk. “In light of these realities, the most important thing that the insurance industry and other industries can do to reduce the potential for nuclear, biological, and chemical terrorism is to lobby members of Congress and other government officials to effectively fund the many good initiatives that are underway or are in the process of being developed to combat terrorism.” Among these is the Terrorism Risk Insurance Act (TRIA), which is set to expire at the end of 2005. But, the study goes on to say, “the availability of insurance is not the core issue in dealing effectively with the new risk environment.” Insurers also need to lobby the government to put money towards its own means of combating the risk of terrorism.

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