The insurance industry has rebounded after the September 11th terrorist attack on the World Trade Center – the largest loss in insurance history, according to the New York Insurance Association (NYIA).
Addressing a public hearing before the New York State Assembly Committee on Insurance, and the Assembly Committee on Oversight, Analysis and Investigation, Ellen Melchionni, vice president of NYIA, called for renewal of the federal terrorism program before the fourth quarter of 2004.
Two and a half years after the September 11th tragedy, the insurance market is still recovering from the unprecedented loss it sustained, she observed. The enactment of the Terrorism Risk Insurance Act (TRIA), the federal backstop program, has been somewhat helpful in comforting insurers and reinsurers, Melchionni said.
However, she noted that this temporary program, which contains many flaws, is due to expire. “Unfortunately there are no true signs that TRIA or any other federal program will be implemented in time for insurers to secure reinsurance contracts for 2005,” she said.
The NYIA has cautioned the state’s insurance department and federal lawmakers that a program needs to be in place by the fourth quarter of 2004. “If no program is in place, we are certain there will be market disruption and dislocation – not only affordability, but availability may be a problem for commercial properties,” Melchionni said.
The NYIA has been working with the department to help formulate some alternate mechanism which would increase capacity and avoid uncertainty. One such alternative could be to allow New York insurers a tax deferred catastrophe reserving option, she said.
Melchionni noted that of the more than 30,000 claims filed relative to the September 11th attack, the vast majority were settled within an appropriate time frame, indeed many were settled within days.
“To date there are very few open claims. The majority of these are likely to be the most complex claims or involve independent adjusters that have inflated claims and now require litigation for a reasonable settlement,” she said.
Carriers had done a phenomenal job in paying the legitimate claims quickly, while taking the customary time frame needed to investigate questionable claims, Melchionni observed. This is further proven by the fact that there were minimal complaints filed with the Department related to the 9/11 tragedies.
“There were fewer than 400 total complaints filed and only 27 of those complaints were actually substantiated,” she said.
She went on to note that statistics indicate that the hard commercial market has likely reached its peak. “There are indications that rates are not increasing at the same level and in some areas rates may be stabilizing. However, affordability is still considered an issue in some instances,” she added.
Melchionni concluded that commercial insurance capacity and pricing in New York is not much different than what is being seen across the country.
“The industry has rebounded and demonstrated its resolve. We continue to experience the ups and downs of the hard and soft market as the industry gets back to the customary insurance cycle,” she said.
The New York Insurance Association is a trade association of property/casualty insurance companies which provide coverage for autos, homes and businesses throughout New York State.
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