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NAMIC Applauds Committee Passage of H.R. 4634, The Terrorism Insurance Backstop Extension Act

WASHINGTON (Sept. 29, 2004)-This morning, the House Financial Services Committee passed H.R. 4634, the Terrorism Insurance Backstop Extension Act. The bill will extend the Terrorism Risk Insurance Act (TRIA) for two years until Dec. 31, 2007. The committee approved the bill by voice vote.

The bill was introduced in June by Reps. Pete Sessions, R-Texas, Richard H. Baker, R-La., Sue Kelly, R-N.Y., Eric Cantor, R-Va., and Deborah Pryce, R-Ohio, and currently has 91 co-sponsors. It is expected that the House will take up H.R. 4634 before it adjourns for the November elections.

TRIA, enacted in response to the Sept. 11 terrorist attacks, ordered that insurers offer terrorism coverage while creating a federal backstop for huge losses. Lawmakers envisioned it only as a temporary measure until insurers could assess the market. Without new legislation such as H.R. 4634, the program and the backstop are set to expire Dec. 31, 2005.

"With policy expirations occurring now through the end of this year, it is absolutely essential that the federal backstop provided by TRIA be continued because policies taking effect on Jan. 1, 2005, will extend beyond the scheduled sunset of Dec. 31, 2005," said David A. Winston, NAMIC federal affairs senior vice president. "NAMIC appreciates the outstanding leadership of Committee Chairman Michael G. Oxley, R, Ohio, to extend TRIA for two years. The two-year extension will permit Congress and the insurance industry to develop alternatives to protect the economy from future terrorist attacks," said Winston.

At present, there is no private market alternative to TRIA, as terrorism coverage remains an uninsurable risk. The underwriting criteria for such coverage is highly sensitive classified information within the sole possession of the U.S. Government. Further, there has been no claims experience outside of the tragic events of 9/11.

"NAMIC will continue to press hard for Senate consideration of a TRIA extension. We are encouraged by the bipartisan bill, S. 2764, the Terrorism Risk Insurance Extension Act of 2004, sponsored by Sen. Christopher J. Dodd, D-Conn., prior to the August recess extending TRIA for two years."

Earlier this month, NAMIC established a new and vitally important working group chaired by Warren Heck, Greater New York Mutual Insurance Co., devoted to the issue of terrorism insurance. Guest speakers included officials from the U.S. Department of Treasury, the U.S. Department of Homeland Security, and an economist who co-authored a study on TRIA.

The group heard from Wayne A. Abernathy, Assistant Secretary, Domestic Finance - Financial Institutions, U.S. Department of Treasury; Bruce Deal, Managing Principal, Analysis Group, Inc. Assistant Secretary Abernathy offered Treasury's view of TRIA. Deal discussed the "Economic Impacts of Federal Participation in Terrorism Insurance Coverage."

The following day, the group heard from Roderick Thaler, Executive Vice-President, National Director, Willis Re; Domenick Yezzi, Jr., Vice-President for Specialty Commercial Lines, ISO; and Paul Speller, Senior Analyst, Information Analysis - Strategic Division, U.S. Department of Homeland Security. Thaler addressed the availability of reinsurance post 9/11. Yezzi offered his insight on the availability of terrorism insurance and Speller commented on the realties of terrorism in the United States.

"So many critical economic decisions depend on the availability of terrorism coverage, making the TRIA extension imperative to avoid marketplace instability," said Winston. "NAMIC's TRIA Working Group will continue to meet, beyond passing this legislation, to ensure that there is certainty in the marketplace."

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For further information contact:
Robert Detlefsen at rdetlefsen@namic.org
or (317) 875-5250