Money Laundering, Terrorism and Financial Institutions - USA Patriot Act Monitor

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5/18/2004 USA PATRIOT Act Monitor News Release: Can Terrorism Risk Insurance Exist Without Government Support?

In testimony before the Senate Banking Committee, Richard J. Hillman, GAO Director of Financial Markets and Community Investment, stated that the Terrorism Risk Insurance Act had largely fulfilled a principal objective by enhancing the availability of terrorism insurance for commercial policyholders (GAO-04-806T). Nevertheless, many businesses are not purchasing coverage, and those that are tend to be in the Northeast, where the experience of 9/11 cannot be ignored. Perhaps more troubling than the lack of coverage, is the conclusion that there has been "no progress to date toward finding a reliable method for pricing terrorism insurance and little movement toward any mechanism that would enable insurers to provide terrorism insurance to businesses without government involvement." The Terrorism Risk Insurance Act was designed "to give the insurance industry a transitional period during which it could begin pricing terrorism risks and developing ways to provide such insurance after [the Act] expires." Unfortunately, a transition towards industry self-sufficiency in providing terrorism coverage does not seem to be happening. Although the testimony does not conclude that Congress will be forced to extend the Act, the absence of alternatives makes this a definite possibility. Further analysis of the Act and the GAO perspectives will be found in forthcoming issues of the Monitor.

The USA PATRIOT Act Monitor and the news releases prepared by the Monitor staff are services of the Civic Research Institute, publisher of Money Laundering, Terrorism, and Financial Institutions, by Raymond Banoun and John Ensminger. Contact and subscription information may be obtained at http://www.civicresearchinstitute.com/moneylaundering or by calling the Civic Research Institute at 609-683-4450 (fax: 609-683-7291).

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