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Talks on Terror-Risk Insurance Pool Reach Impasse

The German government looks unlikely to reach agreement with the country's insurance industry on the creation of a terror-risk insurance pool. Some Industry giants now consider setting up their own reinsurance company.

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Terror-risk insurance premiums have gone up since the September 11 attacks.

The German government is looking increasingly unlikely to reach an agreement with the country's insurance industry on the assumption of liability for the risk of terrorist attacks, Handelsblatt has learned from people close to the ongoing negotiations.

At the same time, many major German companies remain uninsured against terror risks.

These people said that no new talks on the issue had taken place since 12 Dec. 2001.

Germany's insurance industry favors a pool solution, under which insurers would provide cover up to a certain level of damage. Beyond this level, the cover would be provided by the government.

The government has so far set three conditions for a pool solution. First, the State's liability should be limited. Second, it should receive a premium from the parties insured. Third, its risks should be limited.

These conditions were again confirmed by a spokesman for the Finance Ministry on Wednesday.

Germany's industry is also taking a critical view of the insurers' pool model.

The BDI industry federation levelled criticism at three aspects of the model. First, it said, there had been a failure to publish a definition of what represented a terror risk. Second, it was dissatisfied with the planned split between smaller terror risks – for which cover is offered – and major risks without cover. Third, the pool would cover only damage to property and not liability risks, the BDI pointed out.

The insurance industry meanwhile is pressing for a quick solution. "We should complete the project by the start of March or declare it failed," an industry representative said.

Meanwhile, faced with a drastic increase in insurance premiums following the Sept. 11 terrorist attacks in the United States, BASF AG has decided to take a different route.

The chemicals giant is considering setting up its own reinsurance companies, a company spokesman told Handelsblatt on Wednesday.

German national carrier Deutsche Lufthansa and technology giant Siemens AG were said to be interested in participating in a joint reinsurance company.

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