NCOIL Task Force on Terrorism Backs TRIA’s Reinstatement

With the Terrorism Risk Insurance Act expiring at the end of this year, the National Conference of Insurance Legislators Task Force on Terrorism agreed during meetings in Hilton Head, S.C. to resurrect a resolution proposed last year urging congressmen not to let TRIA lapse and to send letters to congressmen urging them to act now to make sure there is a backstop in place by the end of this year.

The task force heard spokesmen representing the National Association of Mutual Insurance Companies, the Independent Insurance Agents and Brokers of America and the American Insurance Association, after which it agreed to send letters to congressmen and launch a campaign to motivate other industries to get involved in a drive to support TRIA’s renewal.

“It is very important for us not to be left out in the cold, not knowing exactly what is happening, what are the priorities of our congressmen and senators – we have to get the message to them by calling on our friends in the real estate business and investors that might receive a better effect and response than if insurance companies try to take care of themselves,” New York Assemblyman Ivan C. LaFayette, task force chairman said.

“If TRIA expires at the end of December there will be no backstop in case of terrorism exposure,” NAMIC spokesman Neil Alldredge said. “Obviously that causes a great deal of concern for the industry and that could be broadened to the economy at large, where the effects would be very detrimental.

“The politics of the issue have become such that it is probably even money whether TRIA will be reauthorized.”

Although TRIA isn’t perfect, Alldredge urged NCOIL to push Congress to keep TRIA going. He said the certainty that the program brings, even with its weaknesses, is worthwhile.

Alldredge said there are two areas in which states can be helpful. First, states that have statutory fire policies should amend them to exclude terrorism coverage that deals with a fire following a terrorist event. He said many statutes did not anticipate terrorism because they were written before the problem was evident.

“The industry has been going state-by-state to pursue those kinds of exclusions and several states have adopted them,” Alldredge said. “Irregardless of what happens with TRIA, that is an effort that should continue.”

Second, if the program were to expire there are actions the states can take to reverse the situation. Many states in the interim after September 11 and before Congress enacted TRIA, adopted exclusions which would expire if the federal government were to enact a program, they did so – now those states should be encouraged to put those exclusions back in place.

Wesley Bissett, an IIABA spokesman agreed that something has to be done by Congress.

“Two certainties exist today, that the risk of another terrorist attack is not reduced and in fact is greater than it ever was before,” Bissett explained. “We just saw once again that terrorists involved in the Madrid train bombing had detailed plans for Grand Central Station and were potentially planning another attack on New York City and every governmental source suggests the risk of terrorist activity is as significant as it has ever been.

“The other certainty is that the marketplace lacks the capacity and ability to cover these types of risks. I am not an expert in this area, but I hear experts like Alan Greenspan say he doubts private markets will be able to step up to the plate, I take his word for it.”

Stef Zielezienski, AIA vice president and general counsel said federal participation is needed to deal with catastrophic terrorism. He said that a long-term mechanism would be better than TRIA, but the problem is time.

“There needs to be a backstop in place, whether it is an extension or a long term program,” he said.

“Should TRIA go away we are going to have the same situation we had post September 11 and prior to TRIA’s passage with real estate transactions being installed due to the unwillingness of private insurers to abate the terrorism risk for landmark buildings absent their ability to get sufficient premiums,” Zielezienski explained. “Billions of dollars of commercial mortgage-backed securities were stalled prior to TRIA’s passage, you would probably see that happen again should TRIA expire.”