Aon: Private Insurance Market Cannot Operate Without Some Form of Public Backstop Against Catastrophic Terrorism Losses
05 Ottobre 2005 - 3:01PM
PR Newswire (US)
Broker Proposes Framework for Public/Private TRIA Alternative
CHICAGO, Oct. 5 /PRNewswire/ -- In anticipation of the Oct. 7, 2005
National Symposium on the Future of Terrorism Risk Insurance, Aon
(NYSE:AOC), a leading commercial insurance and reinsurance broker,
said today that the private insurance market cannot operate without
some form of public backstop against catastrophic terrorism losses.
According to the company, the Terrorism Risk Insurance Act of 2002
(TRIA), while not perfect, has provided the terrorism insurance
market with tremendous benefits in terms of increasing capacity and
decreasing the price of terrorism coverage. (Logo:
http://www.newscom.com/cgi-bin/prnh/20041215/CGW049LOGO ) Aaron
Davis, vice president, Aon Property Syndication, said: "Insurance
is a lynchpin in any economic recovery following a catastrophe
loss. The less insurance risk transfer, the greater exposure to the
economy in general. Indirectly or directly, the federal government
will end up funding for a terrorism loss, particularly if a
majority of it is uninsured. This scenario is unacceptable in light
of the continuing and escalating risk of terrorism. The
public/private partnership that has emerged following 9/11 should
continue in the absence of a realistic private solution." According
to Davis, Aon has already noticed an up-take in commercial clients
opting for terrorism cover in their property insurance policies, as
well as a substantial increase in pricing. This stands to reason,
as without TRIA mandating that carriers offer set levels of
terrorism cover, a number of markets simply will no longer carry
terrorism risks. As with any supply/demand scenario, the finite
amount of terrorism insurance capacity will force prices to
increase. Davis said: "Companies that can find terrorism cover will
also find significant increase in price, and those will be the
lucky ones. Due to limited capacity, there will be many commercial
interests that won't be able to secure any terrorism coverage at
all. In this situation, any public/private backstop solution is
welcomed when faced with the prospect of a terrorism insurance
market in the U.S. without a catastrophic safety net in place." Aon
Re, the company's reinsurance brokerage group, has created a
proposed framework of such a solution, one that would involve the
creation of a privately funded, federally mandated "facility" and
bonding process that would support insurers' ability to provide
adequate and affordable terrorism coverage. Bryon Ehrhart,
president, Aon Re Services, said: "In consultation with several
insurers, industry groups and after considering the potential
severity of terrorism losses, we've developed a long-term solution
to the issue of terrorism risk in the United States. Our proposal
centers on a mandatory terrorism reinsurance facility with several
key features. As with any long- term solution, many of the
concept's key requirements entail significant federal government
legislative action - similar to the federal mandate and override of
individual state insurance regulation introduced through TRIA." Key
principles to the Aon Plan include: -- Facility will be structured
to fund up to two USD$40 billion events; -- U.S. Government to
attach in excess of USD$40 billion up to USD$100 billion, with
losses above USD$100 billion to be reviewed by congress; -- Losses
up to USD$40 billion in excess of cash accumulated in the facility
will be funded through issuance of tax-exempt bonds; -- Facility
will be tax exempt; -- Facility to provide 95 percent quota-share
reinsurance coverage on covered losses up to a total industry loss
of USD$40 billion; -- Losses covered by the Facility will be above
a reasonable industry and company level threshold from a foreign or
domestic terrorism event; -- All commercial and all personal lines
of insurance will be covered by the Pool. The proposed Aon Plan is
meant to be a long-term solution; however, features of this plan
could be adopted in the TRIA debate as to a "reformed" backstop.
Beginning the planning cycle for a long-term facility in 2006 would
provide the industry and the economy as a whole with a start
towards transitioning to a permanent solution for terrorism risk in
the U.S. Added Ehrhart: "None of the Aon Plan requirements are
outside the realm of possibility. Many are key features of both
TRIA and other public/private schemes." Aon representatives will be
available to discuss TRIA and the Aon Plan before and after the
National Symposium on the Future of Terrorism Risk Insurance, which
takes place Friday, Oct. 7, 2005 in the Cannon House Office
Building, Caucus Room, United States House of Representatives in
Washington, D.C. from 9:00 a.m. - 12:30 p.m. Aon is not a sponsor
of this event, and is not currently scheduled to participate in the
panel discussion. To arrange an interview with an Aon
representative, please contact Thaddeus Woosley at 312.381.2446.
About Aon Aon Corporation ( http://www.aon.com/ ) is a leading
provider of risk management services, insurance and reinsurance
brokerage, human capital and management consulting, and specialty
insurance underwriting. There are 47,000 employees working in Aon's
500 offices in more than 120 countries. Backed by broad resources,
industry knowledge and technical expertise, Aon professionals help
a wide range of clients develop effective risk management and
workforce productivity solutions. For more information, contact:
Thaddeus Woosley, Aon Corporation, 312.381.2446, Or Al Orendorff,
Aon Corporation, 312.381.3153, This press release contains certain
statements related to future results, or states our intentions,
beliefs and expectations or predictions for the future 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:
general economic conditions in different countries in which we do
business around the world, changes in global equity and fixed
income markets that could affect the return on invested assets,
fluctuations in exchange and interest rates that could influence
revenue and expense, rating agency actions that could affect our
ability to borrow funds, funding of our various pension plans,
changes in the competitive environment, our ability to implement
restructuring initiatives and other initiatives intended to yield
cost savings, changes in commercial property and casualty markets
and commercial premium rates that could impact revenues, changes in
revenues and earnings due to the elimination of contingent
commissions, other uncertainties surrounding a new compensation
model, the impact of investigations brought by state attorneys
general, state insurance regulators, federal prosecutors, and
federal regulators, the impact of class actions and individual
lawsuits including client class actions, securities class actions,
derivative actions, and ERISA class actions, the cost of resolution
of other contingent liabilities and loss contingencies, and the
difference in ultimate paid claims in our underwriting companies
from actuarial estimates. 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.
http://www.newscom.com/cgi-bin/prnh/20041215/CGW049LOGO
http://photoarchive.ap.org/ DATASOURCE: Aon Corporation CONTACT:
Thaddeus Woosley, +1-312-381-2446, or Al Orendorff,
+1-312-381-3153, , both of Aon Corporation Web site:
http://www.aon.com/
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