President Bush wants it. So do Federal Reserve Chairman Alan Greenspan, the U.S. House of Representatives, much of the U.S. Senate and the entire commercial insurance industry. Ditto groups representing real estate interests, banks and retailers. Just about everybody seems to want it. It's right up there with Mom, apple pie, the New York Fire Department and the flag–making it almost unpatriotic to oppose it.

"It" is a government-backed reinsurance facility to absorb the brunt of financial losses from another mega-terrorism incident like Sept. 11. The World Trade Center attack caused an estimated $38.2 billion in losses for the U.S. insurance industry, a tally that forced some reinsurers to the brink of insolvency and put the entire niche in peril. Unable to purchase reinsurance to spread their risk of loss, commercial insurers simply stopped offering terrorism coverage, essentially forcing companies to bear the risk burden on their own balance sheets. Hence, the notion of a federal reinsurance facility: If the government absorbed insurers' catastrophic terrorism losses, the industry would continue to provide coverage.

At least, that was the argument late last year when the industry and the nation were still in a state of turmoil following the terrorist attacks and the discovery that the economy was, in fact, in recession. Now, there's a fly in the ointment. After regaining their composure, both reinsurers and insurers have tiptoed back into the market to offer terrorism insurance. Why? Because premiums have risen sharply–according to Lloyd's of London, at least 80% for commercial property–and there is a chance to make some money. No doubt, many also anticipate that Congress and the Bush administration will ultimately do the "right thing" by business and provide some kind of safety net.

Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.

  • Critical Treasury & Risk information including in-depth analysis of treasury and finance best practices, case studies with corporate innovators, informative newsletters, educational webcasts and videos, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM websites including and

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.