Copyright 2001 The New York Times Company
The New
York Times
September 27, 2001, Thursday, Late Edition -
Final
SECTION: Section C; Page 1; Column
5; Business/Financial Desk
LENGTH: 903 words
HEADLINE: A NATION CHALLENGED: THE INSURERS;
Insurers Ask Help to Survive Future Losses
BYLINE:
By JOSEPH B. TREASTER
DATELINE: WASHINGTON,
Sept. 26
BODY: Insurance executives told Congress
today that they had plenty of money to pay for about $40 billion of losses from
the terrorist attacks on Sept. 11. But they said they urgently needed help to
provide coverage for possible future violence.
In testimony before the
House Committee on Financial Services, some of the leading insurers argued that
since
terrorism had the potential for enormous repeated
financial blows, the government should take responsibility for paying the most
expensive claims. They said they were not seeking a bailout, similar to the $15
billion relief package that the airlines received last week, but assistance in
confronting an immeasurable financial abyss. "There's no way to price for this,"
said Ronald E. Ferguson, the chairman of General Re, one of the country's
largest insurers and a unit of Berkshire Hathaway, in an interview after the
hearing. "There's no way you can expose your capital and your shareholders to
what amounts to almost infinite risk."
Dean R. O'Hare, the chief
executive of the Chubb Corporation, another big insurer, told lawmakers that
something had to be done quickly. "We have a crisis brewing as we speak," he
said.
Negotiations are under way for renewal of much of the nation's
commercial insurance, he said. No insurer, he said, is prepared to take on all
the risk of any huge corporation; and so far, none of the reinsurance companies
that usually share the risk with retail or primary insurers are willing to
provide terrorism coverage.
Unless a solution is found quickly, he said,
American corporations will have no coverage for terrorism and, in the event of
an attack, will have to pay for their own losses. That would bankrupt some
companies and disrupt the national economy.
Representative Christopher
Shays, a Republican from Connecticut, responded with skepticism. Was the
question of insurers' providing coverage, he asked, a matter of "can't or
won't?"
Mr. O'Hare responded, "There's no way on earth a single company
could offer hundreds of millions of coverage on its own."
Lawmakers
generally responded sympathetically to the insurers, praising them for their
decision to ignore war provisions in much of their coverage that might have
enabled them to refuse to pay claims in the recent attacks. But they made it
clear they were not eager to draw the government into the insurance business and
take on commitments for untold billions.
"I would be extremely reluctant
to accept any plan that puts the taxpayer on the hook for insurable losses,"
said Representative Richard H. Baker, a Republican from Louisiana. Particularly,
he added, "when there is no federal office that exercises any real jurisdiction
over solvency and business practices of the industry."
Insurance is
regulated state by state without industrywide federal oversight.
In the
short term, some help could come from the Securities and Exchange Commission.
Harvey L. Pitt, the chairman of the S.E.C., told legislators that the agency was
considering easing regulations to allow the airline and insurance industries to
raise capital more quickly. He also said he might ask Congress to extend a
waiver on certain trading regulations that has permitted companies and
executives to help prop up the price of their shares. With the waiver, publicly
traded companies can buy their own shares without the normal restrictions on
volume and timing.
As a model for government action, the insurers cited
a plan developed in London in the early 1990's in response to Irish Republican
Army attacks in which private insurers paid the first $150,000 or so for
terrorist damage. Then a pool of money created by contributions from insurers
and the government paid claims. When those funds were exhausted -- which the
insurers said had never happened in London -- the government would pay.
No previous terrorist attacks anywhere have come close to the ones in
New York and Washington in casualties -- more than 6,000 people are missing and
presumed dead -- and financial losses.
Until those attacks, terrorism
coverage was included along with other commercial coverage in the United States,
at no extra charge, under the assumption that the chance of its ever being used
was remote.
Kathleen Sebelius, the president of the National Association
of Insurance Commissioners, the organization of state insurance regulators,
encouraged the lawmakers to consider giving the industry financial backing. But
she cautioned against any "new mechanism that would discourage private market
capital."
The nation's insurers have tried for several years to get the
government to take on the highest costs in natural catastrophes like hurricanes
and earthquakes. But today, Mr. Ferguson said he felt the government had a
greater obligation to help out with terrorism. "After all," he said, "the basic
duty of the government is to defend its citizens."
The insurers and
members of Congress said they expected furious negotiations on the issue over
the next few days. "This is an issue for today, tomorrow and the next day," Mr.
Ferguson said, "not next year."
But Mr. Shays said he did not expect
Congress to decide as quickly on the insurance issue as it did on the bailout of
the airlines, which was accomplished in a few days.
"I have confidence
that this is going to be legislation that is going to be thoroughly debated,"
Mr. Shays said, "and is not just going to go through."
http://www.nytimes.com
GRAPHIC: Photo: A
Customs agent views the damage to the Customs office in the wreckage of the
World Trade Center. Insurance executives asked Congress yesterday for assistance
in paying claims on such damage. (Reuters)(pg.
C4)
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September 27, 2001