Axa cancels high-risk policies

November 26, 2001 Posted: 1256 GMT

LONDON (CNN) -- Axa, Europe's biggest insurer, has canceled all its big-risk commercial insurance policies because of increased risk since the September 11 terror attacks.

The company said it can no longer shoulder the uncertainty of insuring against terrorist attacks without help from the French government, the Wall Street Journal reported on Monday.

Axa confirmed to CNN on Monday that it is in urgent discussions with the French government about getting state aid to help it cover corporate clients. Insurers normally spread the weight of risky cover onto reinsurers – but unlike primary insurers, re-insurers can refuse to underwrite that risk.

Insurance companies say outright cancellation of policies is commercially undesirable.

While the insurance industry is used to handling massive claims, such as those arising from earthquakes and hurricanes, it says terrorism is too unpredictable for it to cover on its own.

French insurance companies have a legal obligation to provide terrorist coverage. Insurance groups say that since reinsurers now refuse to cover acts of terrorism, they can no longer comply with the rules

"We need to know if the state will step in and define the rules in terms of reinsurance," said Christophe Dufraux, Axa spokesman in Paris told the WSJ.

Axa announced last month it was canceling its coverage of the World Cup soccer tournament next year because of the increased risk of terrorist attacks.

Axa's new policy, which other insurance firms in France are expected to follow, could leave French companies without adequate insurance coverage at the end of the year when most insurance contracts expire.

"We are in a situation where it is almost too late to cover all the risks in time for January 1," said Philippe Detrez, president of the French risk managers' association and head of risk management at PSA Peugeot Citroen .

"The government needs to take a decision in the next couple of days."