Adequate insurance coverage for major terrorist attacks would not be available without a loss control program administered by the federal government, the National Association of Mutual Insurance Companies said today.
“Mutual insurance companies have an obligation to their policyholders to remain financially stable,” said Jimi Grande, senior vice president of federal and political affairs for NAMIC. “Terrorism presents a dynamic threat that is intentional, responsive to countermeasures, and purposefully unpredictable.”
After paying out more than $40 billion in claims related to the Sept. 11, 2001 terrorist attacks, many insurers recognized the increasing threat of catastrophic terrorism as a unique risk given its adaptive and unpredictable human element. To ensure coverage would remain available, the federal government established a program under the Terrorism Risk Insurance Act that enables insurance companies to spread losses from catastrophic attacks throughout the private sector and over time. In the event of an attack similar in magnitude to 9/11, the federal government would help cover losses in the short-term with the private sector repaying the government, with interest, over several years.
“The program created under TRIA remains an unqualified success in fostering a private market and ensuring coverage remains available, all at virtually no cost to the taxpayers,” Grande said. “Because of TRIA we’ve seen continued development across the country, providing thousands of jobs, and have protected our economy against terrorism.”
NAMIC submitted testimony outlining its position in advance of a House Financial Services subcommittee hearing today exploring the future of terrorism insurance. In its testimony, NAMIC cited the program’s success as a reason for maintaining it in its current form, cautioning that efforts to increase individual insurance companies' exposure by increasing their immediate costs after an attack could cause some to fundamentally alter if, where, when, and how they offer commercial coverage.
“Ultimately, the TRIA program wasn’t designed to protect insurers, but to ensure coverage would be available for developers, transportation, tourism, energy companies and the thousands of other businesses that face an economic risk from terrorism,” Grande said.
Director, Federal Public Affairs