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December 16, 2004
Aon Finds Increasing 'Take-Up' Rate for Terror Insurance Coverage; Calls for Capitol Hill, Industry to Step Up Efforts to Renew TRIA
With the "new reality" created by the terrorist acts of Sept. 11, 2001, companies throughout the globe faced a new set of issues in managing the broad spectrum of risks created by these events. In a study released today by Aon (NYSE: AOC), the global risk management, insurance and reinsurance brokerage and human capital consultant, the organization found that 57 percent of companies studied have decided to "take up" some kind of terrorism insurance - an increase over the 24 percent found earlier this year.
An Aon White Paper analyzes the terrorism coverage available in detail, and the company issues a call for added emphasis to renewal of the Terrorism Risk Insurance Act (TRIA), which, without action by the US Congress, will expire on December 31, 2005.
TRIA ostensibly created a new line of insurance cover, providing three- year federal "back stop" reinsurance up to an aggregate limit of US$100 billion, and requiring insurers to make TRIA coverage available to policyholders.
Gary Marchitello, managing director in Aon's National Property Syndication group in New York, stated: "It should come as no surprise to the industry that the coverage offered through TRIA has become increasingly desirable for business. However, we are facing a watershed year for this coverage. With the possible expiration of TRIA, Capitol Hill and the insurance industry cannot afford to postpone efforts to renew TRIA or create a similar mechanism to manage the global terror risks the 'new reality' has created."
The study offers some serious commentary on the future of TRIA. In part, the study states: "TRIA's importance as a backstop cannot be overstated. Its expiration will cause an immediate and significant diminution of the available supply of terrorism capacity that is likely to leave the market hard pressed, if not unable, to meet the potential demand for risk transfer capacity."
The analysis also finds that terrorism risk coverage has become more affordable. The study states: "After the chaotic rollout of TRIA, with its attendant pricing confusion, a more rational market has fostered rational decision making."
The white paper from Aon, "Terrorism Risk Management & Risk Transfer Market Overview," is available for clients and markets. Those interested in receiving a copy can visit http://www.aon.com .
Aon studied over 500 client accounts as part of this research.
This press release contains certain statements relating to future results, which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from either historical or anticipated results, depending on a variety of factors. Potential factors that could impact results include the general economic conditions in different countries around the world, fluctuations in global equity and fixed income markets, exchange rates, rating agency actions, resolution of pending regulatory investigations and related issues, including those related to compensation arrangements with underwriters, pension funding, ultimate paid claims may be different from actuarial estimates and actuarial estimates may change over time, changes in commercial property and casualty markets and commercial premium rates, the competitive environment, the actual costs of resolution of contingent liabilities and other loss contingencies, and the heightened level of potential errors and omissions liability arising from placements of complex policies and sophisticated reinsurance arrangements in an insurance market in which insurer reserves are under pressure. Further information, concerning the Company and its business, including factors that potentially could materially affect the Company's financial results, is contained in the Company's filings with the Securities and Exchange Commission.
SOURCE Aon Corporation
Web Site: http://www.aon.com
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Posted by Tom Troceen