WASHINGTON (April 24, 2007) — The National Association of Mutual Insurance Companies (NAMIC) issued the following statement in advance of the House Financial Services’ Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises hearing today on Policy Options for Extending the Terrorism Risk Insurance Act. The statement can be attributed to Warren Heck, chairman and CEO of the Greater New York Mutual Insurance Company and chairman of the NAMIC TRIA Task Force.
The need for a federal reinsurance mechanism to cover terrorist attacks within the U.S. cannot be underestimated. As President Bush and other government leaders have stated, it is not a matter of whether, but when another terrorist attack will occur on U.S. soil. Absent a federal financial backstop, such an event could cripple the U.S. economy.
Congress should adopt a long-term terrorism reinsurance program — at least five to 10 years in length. It should include provisions that enable and encourage small- and medium-sized companies to participate, since they comprise a significant percentage of the private-sector insurance marketplace.
In the wake of the horrific tragedy of 9/11, the country was able to avoid an economic catastrophe — thanks in large part to the adoption of the Terrorism Risk Insurance Act. I am convinced that the recovery would not have occurred as swiftly as it has or continued, absent adoption of TRIA and its extension in 2005, the Terrorism Risk Insurance Extension Act.
With TRIEA set to expire on Dec. 31, I am deeply concerned that if Congress does not adopt a long-term private/public terrorism risk insurance program, many of our citizens who need terrorism coverage to operate their businesses all across the nation will be either unable to get insurance or unable to afford the coverage that is available.
Businesses of all sizes are among the major beneficiaries of TRIA, as is the federal government. The federal government would most assuredly pick up most of the costs not covered by insurance in the event of a future terrorist attack, just as it has for every major natural catastrophe for years. Absent TRIA, this cost to the government could be astronomical. TRIA encourages a significant layer of private-sector coverage before federal money would be needed, resulting in less expense to the federal government. TRIA also would save the federal government money because it would allow businesses to file claims in a pre-established orderly fashion through the private sector rather than in a disorderly, ad hoc fashion after a major terrorist attack.
It’s crucial that TRIA continues to enable small- and medium-sized insurers to participate, since these companies provide a significant amount of terrorism coverage. For example, smaller insurance carriers are responsible for 27 percent of the workers’ comp market. Many of these companies would likely cease to offer coverage if TRIA’s event triggers were too high or company deductibles were higher than the current level. Without these companies, policyholders would see higher prices and less coverage available.
NAMIC, whose primary membership consists of smaller insurance companies, strongly encourages Congress to include provisions that would allow small and medium insurance companies to participate in TRIA:
TRIA must be extended to assure the orderly recovery of the economy from the shock of another terrorist attack. Failure to extend the program will result in economic chaos, severely undermining the ability of the economy to recover. It is vital that Congress act swiftly to adopt a long-term terrorism insurance program that maximizes the development of the private market and provides a viable, long-term system to protect the economic strength of the country against terrorist attacks.
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Posted: Tuesday, April 24, 2007 12:00:00 AM. Modified: Tuesday, April 24, 2007 2:04:21 PM.
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