Insurance, for coverage of the risk of `terrorism', was on offer by
the Indian non-life insurance industry for a number of years,
prior to September 11, 2001, as an automatic included peril,
in the wording of the basic fire and allied peril policy, and in
the engineering insurance policies as well. And, secondly, the insurers
in offering this coverage did not specifically restrict it either in
the insured limits of coverage, as they do now, or it was offered as
an optional add-on cover, like the earthquake cover, requiring payment
of additional premium.
The risk of terrorism was covered as an integral part of the
basic engineering and fire policies, with no choice for the insured in
the pricing element to opt out of it. Even now the risk of `terrorism'
is offered `free', as a constituent cover of the motor
comprehensive policies, without any price differential.
Following the WTC incident on September 11, 2001 and
the huge losses of over $42 bn it has caused the primary insurers
and their reinsurers, this cover was suddenly withdrawn from the
market by the reinsurers, under the notice giving clauses, forcing the
primary insurers to follow suit. Since the primary insurers are subject
to numerous State Regulatory Authorities in the US, they had to
seek special permission from each of them to go off-cover, which was
given, creating a crisis in the availability of capacity for it. The cover
for terrorism became suddenly unavailable, when it was most
needed, after the WTC attack, requiring government action on the
legislative front. The Terror Risk Insurance Authority was set up in the US. |
