The Alliance of American Insurers urged New York legislators to “resist the temptation” to implement state-specific legislative or regulatory measures involving the federal Terrorism Risk Insurance Act (TRIA) of 2002.
The Alliance bulletin noted that it fully supports the TRIA, but said more time is needed to gauge its full effects. “At this very moment, the U.S. Treasury is meeting with representatives of the insurance industry to establish a process by which the effect of TRIA on the market and the nation’s economy can be meaningfully measured,” stated John Cucci VP of the Alliance’s Northeast Region, in testimony before a public hearing of the New York State Assembly Standing Committee on Insurance, called to assess the ramifications of TRIA.
“Until that and other valuable studies of experience are completed, the Alliance respectfully asks that no conclusions about the need for state law be finalized,” Cucci continued. “Any evaluation of the federal law’s effects also will need to take into consideration the fact that the insurance industry was just entering a ‘hard’ market around Sept. 11, 2001, along with the deepening recession and stock market collapse. All these events have an impact on the health of our industry.”
Cucci indicated that the Alliance “is confident TRIA will provide the protection needed for the state of New York for future terrorism losses, if any,” and called the act “vital to the nation’s economic security and to insurance market stabilization,” mainly by creating “a critical backstop to help defray the cost of future terrorist attacks.”
“While still requiring a substantial financial commitment from insurers, the program should spread the risk, stabilize the insurance market and give insurers the opportunity to once again provide coverage for New York’s important commercial businesses for covered acts, without the looming threat of massive insurance company insolvencies,” Cucci stressed.
The Alliance indicated, however, that it is concerned by demands for terrorism refunds or credits. “If implemented, refunds or credits would be disastrous to the insurance industry, and consequently, to New York and the nation as a whole,” Cucci stated.
“Insurers are in midst of complying with the provisions of TRIA, while at the same time trying to develop appropriate underwriting strategies pertaining to concentration of risk. Under TRIA, insurers still have a net retention and coinsurance for the terrorism exposure. The Alliance is strongly opposed to any effort that will limit an insurer’s ability to appropriately underwrite a commercial risk. Rate suppression will only stymie the goals of TRIA,” Cucci concluded.
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