Greenberg: TRIA Necessary But National Disaster Insurance Plan Isn’t

The nation needs the federal government to backup the private terrorism insurance market but does not need similar government involvement in insurance covering natural catastrophes, according to a leading industry executive.

“TRIA [Terrorism Risk Insurance Act] has to be renewed,” claims C.V. Starr & Co. Chairman Maurice “Hank” Greenberg in a recent interview. “The private sector has not got the capital to issue policies to cover weapons of mass destruction. That’s impossible. You need the entity that has the printing press to do that and that’s the U.S. government.”

Congress is currently weighing whether to renew TRIA, the federal government’s terrorism reinsurance program.

On the other hand, Greenberg thinks the private sector should be left alone to handle risks related to natural catastrophes.

“We are in the insurance business. We are in the risk business. And if you start taking away every risk that industry is exposed to, then what do you need an insurance company for?” he notes in a portion of an interview with Insurance Journal conducted at the recent Target Markets Program Administrators Meeting in Atlanta.

Some officials and members of Congress from hurricane-prone states have been arguing for a federal catastrophe insurance program to supplement private insurance.

Asked if he thinks the government could do more to encourage increased private sector involvement in catastrophe-prone areas, Greenberg suggested that might not be necessary.

“I think the private sector will do that. I think that hedge funds will get in. They have sidecars; they have all kinds of things. And you’ve got to get the right rate. That will happen if you have a major disaster. Rates will go up and some companies will go by the wayside and some won’t,” he responded.

On the matter of industry regulation, Greenberg supports giving insurers a choice of federal or state regulation.

“I think you ought to have an option. I think our system is a little archaic. Even Europe, which is has been slow in many ways, has a much more streamlined way of doing business in Europe than you have in the United States,” he maintains.

“Getting approval state-by-state and having each state have their own policy form approval is a very expensive and tedious way of doing business. That’s why large companies that do business throughout the United States ought to have an option of a federal charter. If you are a smaller company doing business regionally in two or three states or five states, whatever, if you want to have a state charter, have it by all means.”

Watch Greenberg’s comments on TRIA; Cat Plan.

Watch the complete 37-minute video interview with Insurance Journal at the recent Target Markets Meeting in Atlanta.

An edited print version of the interview may also be found in the May 21 issue of Insurance Journal magazine.