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Finite risk covers started out as a good idea--a product that filled a gap in the traditional marketplace, particularly for certain kinds of unusual risks, such as terrorism. Problems have arisen, however, because some have elected to use-- or rather, abuse--finite covers in order to smooth earnings without really transferring any risk.

Reinsurance company managers paint a rosy picture of a soft marketplace welcoming buyers with stable or slightly lower prices. Buyers of reinsurance contracts, however, fret over price hikes, terms and security.