Several US insurers have noted the success of Britain’s Pool Re, a statutory body formed in 1993 to cover property-related damage caused by terrorism. The pool relies on the contributions of UK private insurers, with the UK government acting as a reinsurer of last resort.

A solution to the problem of terrorist-related insurance cover must be found before the US Congress adjourns at the end of this month. There are plenty of options to consider. They include:

The American Insurance Association wants a federal mutual reinsurer formed with initial funding from the Government. The company would be responsible to the US Treasury Department. Loans would be paid back within three years and the Government’s reinsurance role would begin when the reinsurer’s surplus drops to below 20% of its surplus before an event.

The National Association of Independent Insurers’ has suggested a “Federal Terrorism Reinsurance Fund” that would work through an advisory board. A treaty contract form would be used, including an excess-of-loss payout. A minimum $US2.5 million retention would apply to every insurer and reinsurer.

The Reinsurance Association of America proposes the creation of a “Homeland Security Mutual Insurance Company” federally chartered and regulated by the Treasury Department. The company would be governed by its insurance and reinsurance company members and would cover all lines of insurance. The US Government would reinsure the mutual, subject to an 80% retention that would be negotiated individually between Homeland and its insurers and reinsurers.