Government Has Been in No Hurry To Be Insurer of Last Resort
August 14, 2002
The federal government is just now putting the finishing touches on emergency backup for terrorism insurance. But predictions after Sept. 11 that banks and real estate investors would cease to function without terrorism insurance have proved false.
- Prior to Sept. 11, insurers practically gave terrorism insurance away for free -- surmising that the chances for a costly attack were low to nil.
- After Sept. 11, many private insurance companies stopped writing terrorism coverage and appealed to Washington to share the risk if they did.
- In the interim, many projects and properties have gone uncovered because owners have been willing to bet against another attack -- or simply because their owners couldn't afford the sky-high premiums they would have to pay.
- While a few projects have been put on hold because of the high price or unavailability of private terrorism coverage, "trophy" properties worth $100 million are changing hands as briskly as ever.
The question for policy makers is whether an explicit government guarantee at this point would do more harm than good by inhibiting development of private-sector coverage.
Source: Holman W. Jenkins Jr., "How Big Is the Terrorism Insurance Problem?" Wall Street Journal, August 14, 2002.
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