Insurers Criticized Over Terrorism Safety Net
The US government introduced the Terrorism Risk Insurance Act in 2002, after the insurance industry paid out $40 billion in claims following the 9/11 attacks on the World Trade Center. The act is due to expire at the end of this year, but it looks likely, although not certain, that the Act will be renewed. However, there are those who say the safety net, which protects insurers against the kind of costs seen in 2001, is only beneficial to the insurance industry. Mark Calabria, director of financial regulation studies at the libertarian Cato Institute, says that there have been no payments made as a result of terrorism and although the Act costs the US government very little ($1 million per year) it allows the insurance industry to profit. With over 60 per cent of US businesses buying terrorism insurance policies and the insurers being able to offer cover at a subsidised rate, the industry has brought in over $40 billion in premiums, but in the event of a terrorism incident, the government would cover costs over $27.5 bn. Critics say insurance firms should be paying the treasury for their reinsurance cover. Read the full story.
Insurance Industry and Lawyers Disagree Over Motor Policies
The Law Society has criticized the South Australia’s budget proposal that will change third party motor insurance from the current government scheme to a privatised model. The Motor Accident Commission will lose their monopoly on compulsory third party insurance. The Insurance Council of Australia has welcomed the change, stating that the industry has “extensive experience of providing competitive insurance choices”. The move will bring South Australia in line with other jurisdictions where customers are able to shop around for the best deal and there should be fierce competition between insurers. Read the full story.
Predicting the Future of Insurance Regulation
The UK has, over the years, been at the forefront of regulation, which has then been adopted (and sometimes adapted) by other countries. The Financial Conduct Authority will soon publish a report called Recommendations for Change, which will set out their vision for regulation of the financial industry, including insurers. This is likely to include a far greater burden of responsibility on senior executives. Chartered Insurance Institute head of public policy, David Thompson, says that insurers should consider the document’s recommendations and how it could apply to them. He says that it is unlikely that having different regulatory structures for industries that are essentially the same will continue. Read the full story.
Barriers to Developing a Risk Management Strategy
Businesses have become increasingly aware of the risks to their business, but that may not result in increasing their risk management structure. A university study into enterprise risk management initiatives found that while more than half of businesses surveyed believe that risks have grown in volume and complexity, there are barriers in the way of stronger ERM policy. For many, it is a time or resource issue, while some believe ERM does not represent value for the business. A lack of senior management involvement is factor for almost a third of businesses. Read the full story.
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