Moody's: US terror bill will have negative impact on industry

Recent US terrorism legislation will have a "moderately negative" impact on the property and casualty (P&C) insurance industry.

In its assessment of the bill, the ratinsg agency said the P&C sector remains "significantly exposed to terrorism risk."

Moody's suggested that the future availability of terrorism insurance coverage will increase, but costs will remain high.

Ted Collins, managing director at Moody's said: "Having spent the better part of the past year running away from terrorism risk, P&C insurers now find themselves in the somewhat ambivalent position of having their wish of Federal intervention granted, forcing them back into the business of writing terrorism insurance."

Moody's analyst James Eck said: "We estimate that a terrorist event causing $25 billion of losses among participating insurers during 2003 would result in the insurance industry retaining over $11 billion of losses.

"It is likely that some companies would sustain net losses in excess of 10% of policyholder surplus."