WASHINGTON (Oct. 3, 2006) – The National Association of Mutual Insurance Companies (NAMIC) today issued the following statement in response to the release of the Terrorism Risk Insurance Report of the President’s Working Group on Financial Markets. The statement should be attributed to NAMIC Government Affairs Senior Vice President Carl Parks.
“While private sector capacity has increased and prices have decreased since 9/11, it is essential to remember that the Terrorism Risk Insurance Act (TRIA) and the Terrorism Risk Insurance Extension Act (TRIEA) require insurers to offer terrorism risk coverage and insurers have been willing to continue to write such coverage – rather than withdraw entirely from the market – because of the federal backstop that limits their liability.
“NAMIC companies are on the frontlines. They saw what happened after 9/11 -- insurers withdrew from a market they couldn't predict or price and policyholders couldn't get the coverage they needed -- and they are convinced the same things would happen again if there is no private/public federal terrorism program.
“In evaluating the improvements in the marketplace since 9/11, it is important to remember that the private sector has not been inhibited by TRIA and TRIEA. To the contrary, reinsurers had an opportunity to provide coverage for the TRIA deductibles and chose not to pursue it because they could not predict the cost and did not want to risk bankrupting their companies. Six billion dollars to eight billion dollars of reinsurance capacity is a mere drop in the bucket compared to the demand.
“The capital markets take their lead from the reinsurers and have done next to nothing in developing catastrophe bonds. Insurers have done their due diligence on the subject by going to Wall Street. The key companies there say that the terrorism catastrophe bond market might reach $1 - $2 billion over the next five years, with no appetite whatsoever for nuclear, biological, chemical, and radiological (NBCR) risks.
“Thus, the industry will never be able to provide the needed amount of insurance protection, absent a federal backstop.
“Under the circumstances, the only responsible answer is a long-term private/public terrorism program that would encourage the private marketplace to enter the field to the maximum extent feasible and assure an orderly economic recovery after the next terrorism event occurs.
“The insurance industry has been working to devise a long-term program for congressional consideration that would maximize private sector participation without threatening the economic viability of the industry. Key elements of the plan will include:
In working with the property/casualty insurance industry, NAMIC’s TRIA Task Force has developed the association’s “Statement of Principles on Terrorism Risk Insurance.”
The Terrorism Risk Insurance Report issued by the President’s Working Group on Financial Markets can be accessed at NAMIC Online.
For further information, contact
(202) 628-1601 Fax
Marliss A. Browder
(202 628-1601 Fax
Posted: Tuesday, October 03, 2006 12:00:00 AM. Modified: Tuesday, October 03, 2006 10:24:14 AM.
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