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| | Stock – Terrorism Insurance = Risky Investment By Robert Warne - March 18, 2002Knowledge is power, especially when one is deciding whether to invest in a particular company or not. Because only five of the 50 states require terrorism risk to be included in commercial policies, the insurance industry would like the Securities and Exchange Commission (SEC) to require all publicly traded companies to disclose if it has terrorism coverage or not.
The SEC doesn’t see this happening until it can appropriately gauge how many companies are already including terrorism coverage details in their current corporate filings.
Members of the insurance industry say the SEC has the power to successfully pull off this kind of disclosure legislation. Insurers also think that the disclosure may actually push Congress over the edge in passing a federal terrorism reinsurance program.
Reinsureres Swiss Re and Munich Re decided after Sept. 11 not to write new terrorism policies in the U.S. Other reinsureres such as Berkshire Hathaway’s General Re and XL Re have been given little choice of whether to refuse policy renewals or lower limits of liability at higher premium prices.
David Mair, president of Risk and Insurance Management Society, according to Forbes said, “A company in South Dakota might not have terrorism coverage because it can’t be purchased affordably—but it may not be exposed to a significant risk. If that company doesn’t have terrorism insurance, it isn’t a big deal, just like if you don’t have earthquake coverage and you are in an area that is not prone to earthquakes. Will the [investing] public understand that not having the insurance might not have an effect on its operations?”
All said, if disclosure of such information were required it would serve as another prime number to factor into the equation of investing.
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