The American Insurance Association and the Property Casualty Insurers Association of America are praising the National Conference of Insurance Legislators for passing a resolution urging Congress and the Obama administration to reauthorize the Terrorism Risk Insurance Act.
The resolution was adopted unanimously by the State Federal Relations Committee at NCOIL's Summer Meeting in Philadelphia. It moved unchanged from its draft version after a brief discussion, said Frank O'Brien, PCIs vice president of state government relations.
O'Brien told Bests News Service insurance groups all want to see some congressional movement on the issue. I think all of us in the insurance industry were pleased that NCOIL added its voice to the extension of this very important program, he said. We would prefer [an extension] sooner rather than later. Clearly, the sooner it is extended the better it is for everyone involved. It would certainly eliminate uncertainty.
NCOIL's resolution said failure by Congress to extend TRIA would likely result in the inability of insurers to offer widespread coverage for future catastrophes resulting from terrorism or would likely create capacity concerns where terrorism coverage must be provided.
A lack of adequate terrorism coverage may make banks unwilling to extend loans for commercial transactions, such as mortgages and construction projects, forcing the federal government to cover losses instead, the resolution said. Failure to extend TRIA would harm the economy, as financiers might be reluctant to lend, businesses might be reluctant to invest and commercial investors might be unable to afford insurance.
TRIA was authorized in 2002, reauthorized in 2005 and 2007 and is set to expire on Dec. 31, 2014. Currently, there are three TRIA reauthorization bills H.R. 508, H.R. 1945 and H.R. 2146 that have been introduced in the U.S. House of Representatives. One would extend the current bill for five years; one would extend the program for 10 years; a third would also extend the program for 10 years while changing the agency in charge of designating acts of terror.
Since its inception more than a decade ago, TRIA has stabilized the market and made terrorism coverage widely available, said Leigh Ann Pusey, AIA president and chief executive officer in a written statement. TRIA provides much needed predictability for an orderly economic recovery after an event. Thanks to the certainty the program provides, businesses are able to make decisions and free up capital for business expansion and economic growth.
The uncertainty of TRIA reauthorization is expected to continue through 2013, said Emil Metropoulos, senior vice president at Guy Carpenter & Company in a recent Bests Review. TRIA provides a backstop for carriers, but the current uncertainty is impacting large corporate renewals in large at-risk cities. Smaller carriers may need to either cut front-end exposure or buy more reinsurance, he wrote.
The NCOIL resolution also follows the call for congressional debate on the matter by Mario Vitale, chief executive of Aspen Insurance and president of Aspen US Insurance.