Gloyn said the New York attack was the last straw for a hard-pressed insurance sector that had been subsidising insurance for a decade with investment income. The stock market crash had dried up that source and now insurers will take a much tougher stance.
"In the past insurance was ignored as a minor cost," said Gloyn. "Now it must be taken seriously." Since January reinsurers have been cancelling terrorism cover, but the Government has been slow to plug the gap. A system called Pool Re was put in place after the IRA bombing campaign of the mid-1990s, but new legislation will be required before the system can be extended.
All property will be harder to insure, Gloyn warned. Policies will need to be spread over more companies in more layers.
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