Prospects for Insurers Remain Bright
November 15, 2001
Despite the attacks of Sept. 11 -- and, in part, even because of them -- the insurance industry faces a bright future. Not only are they now hiking their premium rates, but the federal government also appears poised to share their risk and exposure in the event of a future terrorist attack.
- Insurers expect to have to pay out $40 billion to $70 billion in claims related to the attacks -- but the industry's capital is estimated at $300 billion.
- Insurers are already raising prices by 100 percent or more on some lines of industrial and commercial insurance - and nearly all such lines are seeing increases of more than 20 percent.
- Since the attacks, aviation underwriters have raised premiums for airlines by 200 percent to 400 percent -- meanwhile canceling parts of airlines' coverage for liability to third parties other than passengers in future terrorist attacks.
- Insurance stocks have jumped 7 percent since the attacks -- outpacing the broader market.
Since Sept. 11, at least seven insurers have sold additional shares of stock.
Now Congress is expected to approve a mechanism that will guarantee that if there are huge future terrorism liabilities, taxpayers will help pay them.
A plan under consideration in the Senate would require the industry to pay the first $10 billion in claims -- with the government picking up 90 percent of any remaining amount. The House Financial Services Committee favors government loans to insurers to help pay future terrorism claims.
Source: Christopher Oster, "Insurance Companies Benefit from Sept. 11, Still Seek Federal Aid," Wall Street Journal, November 15, 2001.
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