Key members of the National Association of Insurance Commissioners (NAIC) are urging Congressional leaders to act this year on a federal solution that will ensure insurance marketplace stability and economic security as the expiration of the Terrorism Risk Insurance Act (TRIA) approaches. TRIA is set to expire on Dec. 31, 2005.
The letter, addressed to Rep. Michael Oxely, chairman of the House Committee on Financial Services, and to Sen. Richard Baker, chairman of the Senate Committee on Banking, Housing and Urban Affairs, indicated state regulators’ concern that “significant market disruption may develop before TRIA’s expiration” at the end of 2005. The commercial insurance business cycle will require insurers and policyholders to make decisions this year with regard to coverage into 2006, thus bringing a need to contemplate no federal backstop for potential losses beyond 2005.
The unknown status of any federal backstop will affect business decisions well before the Treasury Department’s June 2005 report to Congress. This brings the likelihood of the widespread introduction of conditional exclusions for terrorism coverage, which could cause market disruptions and damage to economic growth or overall business confidence.
“This is the same situation we encountered in the aftermath of Sept. 11, 2001, and which in large part prompted TRIA’s enactment,” states the letter, which is signed by four NAIC members: Ernst Csiszar, NAIC President; Greg Serio, chair of the NAIC’s Government Affairs Task Force; Jose Montemayor, chair of the NAIC’s Property and Casualty Insurance Committee; and Donna Lee Williams, chair of the NAIC’s Terrorism Insurance Implementation Working Group.
The letter concludes by urging “Congressional action this year to avoid market disruptions that will occur in the absence of a federal backstop program,” and highlighting the NAIC’s willingness to assist with a solution. The NAIC noted that regulators want to ensure that the Treasury Department has the time it needs to study the issue and make recommendations, while still maintaining stability in the market. A complete draft of the letter is attached.
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