MAYOR BLOOMBERG JOINS CALL FOR TRIEA RENEWAL

In urging renewal of the federal terrorism reinsurance program, New York City Mayor Michael Bloomberg noted that the city is doing its part.

He reported that the N.Y. City police department has built counterterrorism operations that are responding to threats as they arise. Also, he has proposed an investment of $15 million in the Lower Manhattan Security Initiative, which will help safeguard bridges, tunnels, and other infrastructure downtown.

But state and city governments need the federal government to stay involved, Bloomberg said.

"[S]hould the worst happen, we also must be fully prepared to minimize the impact on our 8.2 million citizens, as well as the millions of commuters and tourists who come here each day. This preparation includes not only strengthening rescue and recovery operations, but also taking preventive steps to stabilize the city's economy in the event of an attack. The federal government's leadership in enhancing the availability of commercial insurance has been -- and must remain -- a crucial part of this strategy," he told the Congressional panel.

Bloomberg also said current real estate projects in the city are on course to create "hundreds of thousands of new jobs" and more than $10 billion in additional property tax revenue.

"Their importance to our economy cannot be overstated. But without terrorism risk insurance, none of them would ever get off the ground. And if projects like this are put in jeopardy... so will the future of our city -- the global financial leader for America," Bloomberg warned.

RISK MANAGEMENT A HIGHER PRIORITY FOR GOVERNMENT ENTITIES

Fairfax, Va.-based Public Entity Risk Institute (PERI), a nonprofit risk management training and educational organization, says that risk management operations within government entities have gained a heightened importance according to its survey on Cost of Risk, published last year. The survey was a joint project with the Public Risk Management Association (PRIMA) to assess risk management functions performed by all the various governmental entities.

"Our purpose in conducting this survey was to determine how government entities were addressing risk management challenges," explained Gerard J. Hoetmer, executive director of PERI. "These findings show that risk management operations have assumed a higher priority as more risk management departments now report to senior officials. Equally compelling is what the results tell us about how risk management budgets are spent and what cost cutting measures were used most often."

The Cost of Risk survey collected information on property/casualty trends and public government practices during fiscal year 2004, from respondents in 48 states. Survey participants included municipalities, county governments, school districts and state or state agencies. For the first time, responses were received from special districts, joint power authorities (JPAs) and pools and colleges and universities.

Among the other survey findings featured were breakdowns on how various government entities distribute risk management budgets and what percentage of the total operating budget accounts for liability, workers' compensation and property costs. The survey report also incorporates data from the PERI Data Exchange, which is a database of public sector liability and workers' compensation claims data. The survey is available at www.riskinstitute.org and www.primacentral.org.

FITCH LOOKS AT EFFECTS OF REINSURANCE PROPOSAL

Fitch Ratings says it does not believe that individual (re)insurers' financial or competitive positions will be materially altered under the National Association of Insurance Commissioners' reinsurance task force's proposal to revamp regulations governing reinsurers' collateral requirements and cedants' corresponding ability to take reinsurance credit in their statutory financial statements.

Fitch views the proposal as a credit neutral for primary insurers, a modest positive for unauthorized reinsurers and a modest negative for authorized reinsurers.

The agency expects collateral levels to decline under the proposal as reinsurers pressure cedants to accept minimum collateral levels required to receive reinsurance credit in their statutory financial statements. In exchange, Fitch expects primary insurers to negotiate corresponding price reductions as the cost of funding collateral requirements declines and available capacity increases. This decline will occur over time since collateral requirements for reinsurance transactions entered into prior to the proposal's effective date will not change.

The dollar amounts involved are significant. Collectively, U.S.-domiciled life and non-life (re)insurers reported $605 billion of ceded reinsurance recoverables and $218 billion of collateral on recoverables from unauthorized reinsurers at year-end 2005. Over time the proposal's implementation would reduce the collateral supporting primary insurers' reinsurance assets, the agency believes that the proposal's minimum collateral requirements are well in excess of historical default rates and thus provide more than adequate default protection.