Germany's biggest insurance company makes a plea to the government to lend insurers a helping hand.
Europe's second biggest insurance company, Allianz, reports record losses
Henning Schulte-Noelle, head of Germany's largest insurance company Allianz AG, is hoping that the government will approve a proposal that will prevent the possible collapse of the insurance market in Germany.
The proposed package would allow private insurers to continue issuing policies that cover losses resulting from acts of terrorism. Allianz and other insurance companies want the government to agree to underwrite policies in the event of a major catastrophe.
Schulte-Noelle argues that the British government set a precedent by its underwriting involvement in the wake of the of the IRA terrorist attacks in London. Since the mid 1990s the British government has agreed to step in when claims rise drastically following a terrorist attack, thereby averting a possible collapse of the insurance market.
According to the Allianz CEO, it's only with the government's willingness to underwrite major claims that terrorist risks can adequately be insured against.
Since September 11 major insurance companies are discovering that their policies not only cover the costs directly linked to property losses, but also the financial disruption and even loss of business resulting from the terrorist attacks.
According to industry analysts, these claims covering financial losses could be as high as the direct losses amounting to approximately $40 billion.
At a time of financial constraint, Berlin is unlikely to welcome the potential new call on its funds which underwriting insurance policies would entail.
Members of the ruling Social Democratic Party have said that the insurance companies proposal is just another instance of the private sector "wanting to have its cake and eat it too". Insurance companies would continue to accrue profits but major losses would be carried by the public sphere.
The plea for governmental backing comes at a time when insurance companies calculate their third quarter losses and are beginning to see the financial impact of September 11.