Report: Insurance industry is limiting terrorism coverage

A Government Accountability Office study released Tuesday found that insurers are unwilling to expand coverage for terrorist attacks involving nuclear, biological, chemical or radiological weapons because the industry has determined such events are not an insurable risk.

The study, requested by House Financial Services Chairman Michael Oxley, R-Ohio, found a limited market for insuring against such catastrophic attacks, with many companies excluding nuclear, biological, chemical or radiological attacks from their property-and-casualty coverage, even though some of those exclusions could be challenged in court.

Additionally, federal auditors found that workers' compensation, life and health insurers cover such catastrophic risks, although companies that provide such policies said the prices they charge might not cover their potential exposure in the event of a nuclear, biological, chemical or radiological attack.

"Given the challenges faced by insurers in providing coverage for, and pricing, NBCR risks, any purely market-driven expansion of coverage is highly unlikely in the foreseeable future," the GAO reported.

The report will be highlighted by those advocating that Congress reauthorize the federal government's terrorism risk insurance program, which expires at the end of 2007, against those who would prefer more of a free-market approach.

The American Insurance Association, representing major insurance groups, is advocating the federal government assume financial responsibility for all chemical, nuclear, biological and radiological attacks and continue a program similar to the current program for conventional attacks.

The report comes one day before the House Financial Services Capital Markets and Oversight subcommittees hold a joint hearing on proposals to reauthorize the program. The Treasury Department is scheduled by the end of the week to release its report on recommendations for a long-term fix.

Even though the program does not expire for 15 months, lobbying groups are gearing up. The most prominent group is the Coalition to Insure Against Terrorism, which represents most of the stakeholders, including AIA, the Real Estate Roundtable, the U.S. Chamber of Commerce and the National Association of Realtors.

But members of the coalition have different views for a permanent fix. For example, the Real Estate Roundtable, representing major commercial property owners, is pushing a voluntary system for insurance companies to establish their own pools similar to a system operating in Great Britain.

The AIA has taken a dim view of the pooling proposal for terrorism risk insurance, unsure it would create capacity for insurers to participate in the market. AIA President Marc Racicot said he believed all groups could work together to reach consensus.

"The fact is I don't think anyone is irretrievably entrenched in any particular approach forward. We have begun, perhaps, from different perspectives, with certain presumptions in mind -- mainly that TRIA has worked. We are beginning to explore concepts and to work with one another to come up with the best policy perspective that we can," Racicot said.

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
Close [ x ] More from GovExec

Thank you for subscribing to newsletters from
We think these reports might interest you:

  • Sponsored by Brocade

    Best of 2016 Federal Forum eBook

    Earlier this summer, Federal and tech industry leaders convened to talk security, machine learning, network modernization, DevOps, and much more at the 2016 Federal Forum. This eBook includes a useful summary highlighting the best content shared at the 2016 Federal Forum to help agencies modernize their network infrastructure.

  • Sponsored by CDW-G

    GBC Flash Poll Series: Merger & Acquisitions

    Download this GBC Flash Poll to learn more about federal perspectives on the impact of industry consolidation.

  • Sponsored by One Identity

    One Nation Under Guard: Securing User Identities Across State and Local Government

    In 2016, the government can expect even more sophisticated threats on the horizon, making it all the more imperative that agencies enforce proper identity and access management (IAM) practices. In order to better measure the current state of IAM at the state and local level, Government Business Council (GBC) conducted an in-depth research study of state and local employees.

  • Sponsored by Aquilent

    The Next Federal Evolution of Cloud

    This GBC report explains the evolution of cloud computing in federal government, and provides an outlook for the future of the cloud in government IT.

  • Sponsored by Aquilent

    A DevOps Roadmap for the Federal Government

    This GBC Report discusses how DevOps is steadily gaining traction among some of government's leading IT developers and agencies.

  • Sponsored by LTC Partners, administrators of the Federal Long Term Care Insurance Program

    Approaching the Brink of Federal Retirement

    Approximately 10,000 baby boomers are reaching retirement age per day, and a growing number of federal employees are preparing themselves for the next chapter of their lives. Learn how to tackle the challenges that today's workforce faces in laying the groundwork for a smooth and secure retirement.

  • Sponsored by Hewlett Packard Enterprise

    Cyber Defense 101: Arming the Next Generation of Government Employees

    Read this issue brief to learn about the sector's most potent challenges in the new cyber landscape and how government organizations are building a robust, threat-aware infrastructure

  • Sponsored by Aquilent

    GBC Issue Brief: Cultivating Digital Services in the Federal Landscape

    Read this GBC issue brief to learn more about the current state of digital services in the government, and how key players are pushing enhancements towards a user-centric approach.

  • Sponsored by CDW-G

    Joint Enterprise Licensing Agreements

    Read this eBook to learn how defense agencies can achieve savings and efficiencies with an Enterprise Software Agreement.

  • Sponsored by Cloudera

    Government Forum Content Library

    Get all the essential resources needed for effective technology strategies in the federal landscape.


When you download a report, your information may be shared with the underwriters of that document.