WASHINGTON (Sept. 11, 2012) The program created under the Terrorism Risk Insurance Act has fostered private sector participation in the terrorism risk insurance marketplace and reduced the potential expense for the federal government, said the National Association of Mutual Insurance Companies to a congressional subcommittee today.
Darwin Copeman, a member of NAMIC’s Board of Directors and president and CEO of Wisconsin-based Jewelers Mutual Insurance Company, testified before members of the House Financial Services Subcommittee on Insurance, Housing and Community Opportunity, explaining that the program created by TRIA has been critical to the continued existence of a private market for commercial terrorism coverage.
"TRIA put a ceiling on potential insured losses and reduced the fear that a worst case terrorist event could render an insurer insolvent," Copeman said.
The TRIA program has helped foster economic development in high risk areas over the past decade, ensuring that terrorism coverage is available with smaller events being covered by the private sector while providing a federal safety net against the kind of large scale attacks seen on Sept. 11, 2001. Copeman said that ultimately, 11 years after the 9/11 attacks, terrorism remains an uninsurable risk and the program is as necessary as it has always been.
"The lack of relevant event data usually used in disaster modeling makes it impossible to meaningfully calculate the likelihood, nature, or extent of a potential event - particularly in an age of mass-casualty terror," he said. "This makes adequate pricing and reserving virtually impossible."
Additionally, Copeman noted the human element of terrorism allows for an adaptability not seen in natural disasters that adds to the complexity of trying to underwrite terrorism coverage. "A hurricane cannot study wind-damage mitigation efforts and then think up new ways to get around them, but humans intent on committing acts of terrorism can and do find ways to circumvent security measures," he said.
The TRIA program is currently set to expire at the end of 2014. If congress fails to act, Copeman said, the costs of the next attack, large or small, will fall on the shoulders of the taxpayers, including those who were the victims of the attack.
"Without the TRIA program, coverage for terrorism will become very difficult to find and the result when the next terrorist attack occurs will be more - not less - federal exposure as the government will be under extreme pressure to pay for all of the losses," he said.
Copeman's testimony can be found here
Contact: Matt Brady
Director, Federal Public Affairs