In the heart of the world’s financial markets, insurance agents and companies today urged Congress to protect the country’s economic stability by ensuring availability of terrorism risk insurance through a continued federal role.
The Independent Insurance Agents & Brokers of America was among the groups testifying before the House Financial Services Committee’s Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises during a field hearing in New York City.
Testimony concerned renewal of the Terrorism Risk Insurance Extension Act (TRIEA) of 2005, which is slated to expire at the end of the year.
Congressional leaders including House Financial Services Committee Chairman Barney Frank, D-Mass., and Senate Banking Committee Chairman Christopher Dodd, D-Conn., have said they want to address this issue early in the year. Today’s hearing by the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, follows last week’s Senate Banking Committee hearing on the same topic.
The agents’ association maintained that the private insurance market is “simply not in a position to handle the unpredictable nature and possible immense size and scope of terrorist attacks.”
Agents warned that if the federal role lapses, terrorism risk coverage would become “inordinately expensive and probably unavailable to many businesses.”
While terrorism risk coverage is critical in cities like New York, it’s not just a “big city” or “big business” problem—the economic impact would be widespread if the coverage becomes unavailable, according to agents.
Charles E. Symington Jr., Big “I” senior vice president for government affairs and federal relations, pledged that the Big “I” would keep working to secure a continued federal role in terrorism risk insurance.
The National Association of Professional Insurance Agents also urged renewal of the federal program along with exoanding it to include nuclear, biological, and chemical and radiological (NBCR) coverage.
PIA also maintained that the need for TRIA is nationwide, not just confined to major urban areas, citing comments from PIA agents in Memphis, Cincinnati, and rural areas of Louisiana and Mississippi.
“Insuring against terrorist attacks is not just a ‘New York state of mind,'” the PIA statement said. “TRIA does not solely benefit large businesses in major urban areas. To the contrary, the need for TRIA is not confined to any one city, state or region of the country. Terrorism coverage is being required more and more by lenders of their commercial insurance borrowers of all sizes, on any sizable commercial loan anywhere. Having this coverage available and affordable for small and mid-size commercial insureds—the customers of PIA agencies throughout the United States—is critical.”
The American Insurance Association applauded lawmakers for recognizing “the importance of addressing this issue sooner, rather than later.”
Testifying last week before the Senate banking Committee on behalf of AIA, Charles Clarke, vice chairman of Travelers, endorsed the view of the committee’s chairman that a public-private partnership to insure against terrorism risk be continued for the long-term.
Clarke’s comments were offered as just as relevant to today’s hearing in New York as they were when he testified last week.
“Characteristics that make terrorism an uninsurable risk remain as strong today as they were immediately following September 11, 2001. Most experts agree that it is not a matter of if, but when, another catastrophic attack will occur on U.S. soil. A continued, vibrant federal terrorism risk insurance program, therefore, remains vital to the national security and economic well-being of our nation for the foreseeable future,” Clarke said.
Clarke recommended that Congress keep the existing TRIEA backstop in place for conventional terrorism risk, expand the federal government’s financial role in managing chemical, nuclear, biological and radiological (CNBR) terrorism risk, eliminate the artificial distinction between foreign and domestic terrorism, review the program’s current $100 million trigger to make the program meaningful for small and mid-sized insurers, and preempt burdensome state rate and form regulation with respect to terrorism insurance rates and policy forms.
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