AIA Praises Senate Bill for Terrorism Insurance

Legislation introduced in the Senate last week would accomplish the two things needed to continue protecting the United States from the economic devastation of catastrophic terrorism–extend the Terrorism Risk Insurance Act of 2002 (TRIA) and look at the critically important issue of a long term solution, said Leigh Ann Pusey, senior vice president of government affairs for the American Insurance Association (AIA).

TRIA expires Dec. 31, 2005, and this legislation, authored by Senators Christopher Dodd (D-Conn.) and Robert Bennett (R-Utah), would extend TRIA for two years. It is the same legislation Senators Dodd and Bennett introduced last summer. Extending TRIA drew widespread, bipartisan support just months ago in the previous Congress, and both parties worked up to the last minute to get an extension approved, but time ran out.

“Congress must act quickly before TRIA expires. The threat of terrorism still looms,” Pusey said. “These two widely respected senators continue to show the leadership needed on this issue. They were there following the 9/11 attack, and they have stepped up again to ensure our nation’s economic safety net does not unravel.”

The bill would establish a public/private partnership/commission to take up the challenge of constructing a transitional terrorism backstop mechanism after TRIA ends. “Insurers and other stakeholders have been undergoing an intensive process to explore longer-term options, something we all know is a vitally important goal,” Pusey noted.

TRIA reportedly secures the U.S. economy against catastrophic terrorist attacks by facilitating the purchase of commercial insurance for businesses of all sizes to cover losses resulting from such attacks. The three-year, public-private risk sharing mechanism has worked well, enabling the commercial insurance marketplace to function even under the constant threat of catastrophic terrorist attacks.

Just last week, Federal Reserve Chairman Alan Greenspan told members of Congress he is not persuaded that the private market alone can work well enough to insure against the continuing threat of terrorist attacks. Top intelligence and military officials from the Administration report that terrorists are regrouping and planning possible new attacks against the United States.

Every day new annual insurance policies are being written that extend past Dec. 31, 2005. This overlap reportedly leaves policyholders and insurers exposed to devastating financial consequences in the event of catastrophic terrorist attacks, causing tremendous market uncertainty that grows with each day TRIA is not extended.

“The economic stakes for American workers and businesses are simply too high for Congress not to act quickly,” Pusey said. “We will continue engaging members of Congress and the Administration to identify long-term solutions that will work.”