Congress should act this year to extend the national terrorism insurance backstop beyond Dec. 31, 2005, because the private market remains unable to withstand potentially catastrophic losses resulting from terrorist attacks, a united insurance industry told two U.S.House subcommittees on Wednesday.
Failure to extend the program in 2004 will confuse policyholders and create uncertainty for insurers, industry lobbyists argued. This is because policies written or renewed after Jan. 1, 2005, would run for at least a portion of the coverage term without the protections of the federal backstop.
The Terrorism Risk Insurance Act of 2002 (TRIA) created a temporary public-private risk sharing mechanism that has enabled the commercial insurance marketplace to function even though the threat of further catastrophic terrorism remains. The market was in turmoil following the Sept. 11, 2001, attack, when it became apparent that terrorism had evolved into a risk very similar to war— a peril that property/casualty insurers have never covered (with the exception of workers’ compensation, which allows no exclusions).
At a joint hearing today before the Capital Markets Subcommittee and the Oversight and Investigations Subcommittee of the House Financial Services Committee, eight national insurance associations issued a joint statement urging Congress to extend the federal terrorism insurance program “because the nature and insurability of terrorism risks in the United States—and the capacity of the industry to manage this risk—remain in question.”
The statement was submitted on behalf of the American Insurance Association, the Council of Insurance Agents and Brokers, the Independent Insurance Agents and Brokers of America, the National Association of Professional Insurance Agents, the Property-Casualty Insurers Association of America, the Reinsurance Association of America, the Surety Association of America, and UWC-Strategic Services on Unemployment and Workers Compensation.
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