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Viewpoint: Time to return to backstop



It is hard to believe that 20 years have passed since the catastrophic events of September 11, 2001. As with many who lived and worked in Manhattan that day, there are some sights, sounds and smells that evoke memories of that Tuesday. Every bright, sunny early autumn morning is one, vanished posters are another, the sound of a jet engine flying low above and some particularly hard smoke blowing in the air are different. The personal accounts of the five executives interviewed for Business Insurance's 's cover go to the heart of 9/11 and the human losses suffered by the insurance industry. There are also memories of people who helped each other even when they were in imminent danger, of people who met and received support ̵

1; and that the industry had adapted and recovered over the years.

As usual after major disasters, 9/11 led to fundamental changes in the way insurers and risk managers operate and in particular how terrorist risks are modeled and priced. For example, insurers for workers began to think about whether a company's operations were located in a potential terrorist target area and whether risk accumulations in the event of a catastrophic event would affect several industries. For real estate insurance companies, where terrorist risks before 9/11 were covered in most real estate policies, the size of the losses that arose from the incident and the potential for future attacks led them to introduce exemptions for terrorist coverage until the government stepped in to create a backstop law. terrorist risks signed in 2002 – to stabilize the market. The terrorist market has since expanded as the nature of the risk has changed, demand has increased and the insurers' level of comfort with the risk has increased as the stories on pages 22 and 23 reflect.

Like 9/11, the covid-19 pandemic has generated various industry proposals for some type of government backstop to provide market support and enable pandemic risks to become insurable. Although there are many reasons from various industry participants as to whether this is a good idea, it is clear that well into the second year of a pandemic where there is still uncertainty for companies due to the increase in variants and changing agencies advice on masking and Spacing protocols, lack of coverage continue to be a problem for many commercial insurance buyers. Cost disputes for denied COVID-19-related interruption claims also continue to develop, and although much has gone the insurer's path, the policyholder's profits are not excluded. At a hearing on July 22 in the U.S. Senate Banking Subcommittee on Securities, Insurance and Investments to examine the framework for managing future pandemic risk, Evan Greenberg, CEO of Chubb Ltd., said a public-private partnership would reduce the economic blow to a future pandemic. Martin South, President of the Marsh LLC Division of the United States and Canada, also testified at the hearing that without significant government support, property and liability insurance policies are severely limited in their ability to respond to pandemic-related losses.

The ability to adapt, regroup and reshape itself after catastrophic events is a hallmark of the insurance and risk industries. Is it not time for legislators and industry to reach some kind of consensus on pandemic risk?

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