Catastrophe risk, insurance and terrorism

This article empirically investigates how the terrorist activity of September 11, 2001, was addressed by the insurance industry and government in the United States. It shows that the insurance system worked reasonably well in compensating losses suffered, albeit with various tribulations. It also demonstrates that the insurance industry, along with government as the ultimate risk manager, imaginatively reconfigured markets to continue terrorism insurance coverage in many contexts. The findings challenge many of Ulrich Beck's contentions about catastrophe risks and insurability. At the same time, they indicate the fragility of the insurance system. Insurers' perceptions and decisions about uncertainty - with potential for windfall profits as well as catastrophic losses - create crises in insurance availability and promote new forms of inequality and exclusion. Hence, while the insurance industry is a central bulwark against uncertainty, insurers can also play a key role in fostering it.