Terrorism remains the prime risk to the US economic recovery, Deputy Treasury Secretary Kenneth Dam said here Wednesday.
“The first risk remains terrorism,” Dam said, given that “prospects of future attacks are almost certain,” in remarks to a World Economic Forum conference here.
Dam refused to take questions from reporters afterwards on the Bank of Japan’s intervention to support the yen. In addition to the impact of future attacks on economic activity, the economy continues to be at risk from the lack of insurance against terrorism, he said.
Property insurance contracts, most of which turn over on an annual basis, largely now exclude coverage against terrorist attacks, after firms either refused to take on such risk or raised premiums dramatically.
This was driven by the 36-54 billion dollar cost of the September 11 attacks, Dam noted, which was the largest insured loss in history.
More businesses will be exposed to terrorist attacks without insurance through the summer, he added, as contracts expire. Lack of insurance “hinders the economy’s response” to terrorist attacks, Dam said.
The US administration last year reached agreement with a number of key senators on a package to have the government take on losses that exceed 10 billion dollars. The Senate has yet to vote on the bill, however.
“It’s time for the Senate to act,” Dam said.
Treasury Secretary Paul O’Neill has previously said that a lack of terrorism insurance could cost 1.0 percentage point in lost gross domestic product growth this year, as commercial property development suffers as a consequence.
Separately, Dam said the Treasury will release a new strategy to combat international money laundering within the next month, and warned that some countries are falling behind in the effort to counter terrorist financing.
“Frankly there’s been a little falling off in the alacrity of other countries” to adopt UN-approved lists of terrorist financing suspects and block their financial assets.
