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NEW YORK--The commercial insurance industry should continue writing coverage for most terrorist events, but losses caused by weapons of mass destruction and other large-scale events should be paid by the federal government, longtime insurance industry executive Maurice R. Greenberg said Friday.
"Before September 11th, (the industry) underwrote terrorism insurance all over the world," Mr. Greenberg said, including "in many countries that were very unstable."
"9/11 changed all of that," he said.
Mr. Greenberg, former chairman and chief executive of American International Group Inc. and the current head of C.V. Starr & Co. Inc. and its related companies, made his remarks at the inaugural event of the Barbon Institute, a Boston-based think tank dedicated to the role of insurance and risk management.
A select group of about 60 insurance executives, academics, attorneys and regulators attended the event, held at a Manhattan hotel.
"I don't look to the government for much help generally...but it seems to me, very clearly, that weapons of mass destruction simply cannot be covered by the industry," Mr. Greenberg said.
He stressed that "the industry has finite capital and cannot insure infinite risk." Although commercial insurers have traditionally underwritten a variety of terrorism-related risks, "it wasn't at the scale of terror that exists today," he said.
Certain scenarios, such as a so-called "dirty bomb" or the contamination of a city's water supply, are "above the capacity of the insurance industry," Mr. Greenberg said.
Other parties may also have a role to play in helping to cover losses from terrorist events, he noted.
"There's very little reinsurance in the market for it...you have to devise other means of risk-sharing, and the capital markets may be an answer," Mr. Greenberg said.
With the Terrorism Risk Insurance Extension Act set to expire next year, Mr. Greenberg called for a dialogue between the government and the insurance industry to create a longer-term program.
"The world of terrorism is not going to go away tomorrow," he said. "We're going to be in this mess for a long time...and the industry better face up to what it can and what it cannot do, and what government's role in it should be."
Mr. Greenberg additionally urged industry leaders to step up on behalf of the insurance sector and "begin a concentrated lobbying effort" to give the sector a stronger presence in Washington.
Among other topics he addressed, Mr. Greenberg called for the enactment of legislation to create an optional federal charter for insurers.
"When you think of the different regulations and statutory changes from state to state," he said, companies operating across the country face "a monumental task" and added expenses.
"It's time that the Congress considered giving the insurance industry the option of having a federal charter," Mr. Greenberg said. "I hope the industry will focus on this not in the years ahead, but in the days and weeks ahead."