WASHINGTON (June 19, 2007) — The National Association of Mutual Insurance Companies (NAMIC) today commended the bill that was released to extend the Terrorism Risk Insurance Act. Although NAMIC supports many provisions in the legislation, the most troubling item for the association is the inclusion of language requiring insurers to provide coverage for terrorist attacks from nuclear, biological, chemical, or radiological agents. The following NAMIC statement may be attributed to Marliss Browder, NAMIC’s senior federal affairs director.
“Reps. Michael E. Capuano, Barney Frank, and Joseph Crowley have long been champions of this essential public-private partnership, and we applaud their efforts to move extension legislation on this critical issue. The bill includes a number of positive elements, including a 10-year extension, removal of the distinction between foreign and domestic acts of terrorism, and reduction of the event trigger to $50 million.
While we are pleased to see progress toward extending the federal backstop for terrorism insurance, it’s imperative that small- and medium-sized insurers be afforded the opportunity to participate. While this legislation on one hand would encourage their participation, the inclusion of NBCR mandatory coverage on the other hand would effectively preclude many of them from the program.
NBCR events are qualitatively and quantitatively different from events arising from the use of conventional terrorist weapons. The Government Accountability Office, the President’s Working Group on Financial Markets, and the RAND Center for Terrorism Risk Management have all concluded that virtually no private market exists for NBCR insurance or reinsurance; these risks meet every classic definition of uninsurability; and adding NBCR risks to the TRIA program could jeopardize the existing market for conventional coverage and would be particularly problematic for many medium and smaller insurers.
NAMIC members, like the majority of the insurance industry, oppose the inclusion of mandatory make available requirements for NBCR risks. We recognize the risks posed by NBCR losses, but do not believe that a mandatory make available requirement is the solution. We encourage Congress to create a commission to study all risks associated with NBCR attacks, including the operational questions involved, the various ways that such events might be financed, and the role of the federal government versus the private sector, rather than imposing a premature and counterproductive mandate to provide NBCR coverage now.
However, NAMIC appreciates the inclusion of many of the provisions in the bill. A 10-year extension will provide stability for insurers and policyholders as they work together as partners in our country’s economic growth.
Removal of the distinction for domestic terrorism will close a gap in the program’s coverage and provide our nation’s businesses with the peace of mind that they are covered in the event of loss, regardless of whether the action is the result of foreign actions or “home-grown” violence, such as the tragic events in Oklahoma City.
We’re especially pleased that the legislation reduces the trigger level for federal involvement to $50 million. The current $100 million trigger level is a significant hurdle for small- and medium-sized insurers, which form the backbone of the industry and support niches of terrorism coverage larger carriers have historically avoided. A $50 million trigger level would encourage continued participation by these insurers ensuring greater availability for America’s policyholders.
The Terrorism Risk Insurance Program has proven successful and has contributed to the nation’s economic vitality. With the current TRIA extension set to expire in December, it’s crucial that Congress enact a public-private partnership sooner rather than later. We commend Reps. Capuano, Frank and Crowley for putting forth this legislation, and we look forward to working with members of the committee to revise and advance this legislation to ensure a continued meaningful and effective program.”
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Posted: Tuesday, June 19, 2007 12:00:00 AM. Modified: Tuesday, June 19, 2007 10:03:56 AM.
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