Danis Insurance Center

Since 9/11 US businesses have being insuring themselves against once unimaginable possibilities. Right after the 2001 attacks, many businesses couldn't afford the insurance. The cost of terrorism insurance immediately skyrocketed and some insurers simply refused to provide coverage. Businesses were left exposed to economic chaos in the event of another attack. Eventually congress stepped in and guaranteed that losses over a certain amount would be covered if they were due to a "certified" terrorist attack and if insurance companies would make such coverage available.

Now debate rages about whether the federal government should have a permanent role in the terrorism insurance business. The debate comes down to a single question: Who should provide insurance against terrorism: the private marketplace or a public-private partnership?

The big-city liberals are lining up with the corporate insurance industry against Republican conservatives and consumer advocates. "The industry and the left want a long-term program with some subsidies, but the White House and some Republicans are afraid that it would create another bureaucracy. They want the market to handle it," says a spokesman for the Consumer Federation of America.

Everyone agrees on some factors of the argument. The first is that the damage caused by a terrorist attack with a weapon of mass destruction - nuclear, biological, chemical, or radiological (known together as NBCR in insurance jargon) - would be so great it would bankrupt the insurance industry, and therefore such risks are uninsurable.

Take this example: If New York City was hit by a nuclear bomb, insured losses could be as high as $778 billion, according to an analysis by the American Academy of Actuaries in Washington, D.C. The other point that everyone agrees on is that terrorism insurance for other types of attacks is needed to ensure economic stability and growth.

The White House and the Consumer Federation's Mr. Hunter believe that in the years since 9/11, the market has proved it is capable of covering most losses due to a conventional terrorism attack. "The insurance industry is rolling in money, but the taxpayers aren't. There are huge deficits in the private and business worlds," says Hunter. "Why should we subsidize an industry that's making record profits right now?"

He contends that since "the big stuff", like nuclear, biological, and chemical damages aren't covered anyway, there's no reason for taxpayers to continue picking up part of the tab for conventional attacks like airplanes or truck bombs crashing into buildings.