More than seven months after the September attacks on U.S. soil, finance executives still fear domestic terrorism attacks.
In fact, about two-thirds of chief financial officers in the U.S. believe their companies’ domestic assets are more of a target than their assets overseas, according to a recent survey commissioned by insurance giant Lloyd’s of London and conducted by Harris Interactive. Traditionally, U.S. corporates have seen the Middle East and South America as bigger risks for terrorism.
Of even more significance: 64 percent of CFOs have little or no confidence in the insurance industry’s ability to provide a comprehensive package to protect against any future terrorist attacks.
“September 11 has led to a sea change in attitudes towards the need for terrorism cover in the U.S. The attacks showed, with chilling efficiency, how terrorists can strike at the heart of US business interests,” says David James, terrorism underwriter for Ascot Underwriting at Lloyd’s. “As a result, insurance buyers have become more focused on the risks, not only in terms of protecting property, but in having access to funds to offset business interruption concerns. Similarly, insurers and reinsurers have realized this is a separate risk that needs to be studied, rated and priced separately.”
In fact, prior to Sept. 11, the U.S. accounted for as little as 1 percent of the typical terrorism insurer’s book of business. But after Sept. 11, North America has accounted for 80 percent of Ascot’s terrorism business, according to Lloyd’s.
So how much attention should CFOs pay to business interruption? Hard to say. Lloyd’s did note that $10 billion in claims — about 25 percent of the overall World Trade Center insurance bill — can be attributed to business interruption coverage.
(Editor’s Note: On May 1, CFO.com will examine if another 9/11 would derail the U.S. economic recovery — and how such an attack would change the business plans of U.S. corporations.)