Halt to economic downswing
Owing to the absence of domestic stimuli, the thrust needed to turn the economy around must again come from abroad. For this, eyes turn yet again to the United States, where massive central bank reductions in key lending rates combined with an expansive fiscal policy offer the prospect of an end to the downswing there. After a time lag, once the signs of imminent recovery become established, Germany’s export-ori- ented economy will be poised to profit.
Developments in insurance markets
Events of 11 September 2001
Because of the events of 11 September, 2001 will go down in history as the hardest year ever for insurers.
In the course of the year it became clear that all major market players were resolved to restore the Property insurance class to profitability. Increasingly, minds focused on the basics of insurance business – often, however, with a view to achieving adequate conditions in stages over several years.
This changed dramatically as a result of the tragic events of 11 Septem- ber. Because a loss scenario of that nature and magnitude could not be anticipated in risk analyses, the terrorist attacks had farreaching consequences for Property insurers. For many market players, the catastrophe meant claims payments well in excess of any they had paid in the past. Experts now put the anticipated insured damage at US$ 50 billion. In addition to the World Trade Center, the terrorists destroyed surrounding offices, hotels and infrastructural installations and facili- ties. The reinsurers involved not only had to foot bills for large individ- ual losses but also for an accumulation of losses, including losses in an unprecedented variety of classes: claims encompassed Aviation, Lia- bility, Marine, industrial Accident and Life insurance.
The accepted view now is that terrorist damage on the scale of the World Trade Center incident cannot be fully covered by private insur- ance. So when the insurance year for major-risk Property policies expired, appropriate exclusions were incorporated into them. This was flanked by initiatives aimed at meeting the needs of policyholders by forming statebacked pools to insure against the risk of terrorism. The markets reacted swiftly and very resolutely to this extraordinary and additional burden on results. Marked price rises were seen along with measures to reduce exposure.
12 Developments in insurance markets