According to "The Economist", in the wake of the atrocity, insurance
companies slashed their coverage to $50 million per airline per event.
EU governments had to step in and provide unlimited insurance for a
month. The total damage, now pegged at $60 billion - constitutes one
quarter of the capitalization of the entire global reinsurance market.
Congress went even further, providing coverage for 180 days and a
refund of all war and terrorist liabilities above $100 million per
airline. The Americans later extended the coverage until mid-May. The
Europeans followed suit. Despite this public display of commitment to
the air transport industry, by January this year, no re-insurer agreed
to underwrite terror and war risks. The market ground to a screeching
halt. AIG was the only one to offer, last March, to hesitantly re-enter
the market. Allianz followed suit in Europe, but on condition that EU
governments act as insurers of last resort.
Even avowed paragons of the free market - such as Warren Buffet and
Kenneth Arrow - called on the Federal government to step in. Some
observers noted the "state guarantee funds" - which guarantee full
settlement of policyholders' claims on insolvent insurance companies in
the various states.
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