Big “I” Gives TRIEA Extension High-Priority Status

The initial fanfare of the new Congress has passed, giving way to the serious business of governing. One of the most pressing items that the Big “I” will work on throughout 2007 is the fate of the Terrorism Risk Insurance Extension Act (TRIEA), the successor to the original Terrorism Risk Insurance Act (TRIA) that expired in 2005.

Scheduled to sunset Dec. 31, 2007, the Big “I” has made TRIEA renewal one of its highest legislative priorities this year.

Several factors make the risk posed by catastrophic acts of terrorism uninsurable in the present market. Certainly, one factor is the lack of a viable reinsurance market to meet the possibility of a calamitous terrorist attack. Also, it is virtually impossible, due to the unpredictable nature of terrorism, to construct realistic risk models and to calculate the monetary perils to the business community. The unique characteristics of chemical, nuclear, biological and radiological (CNBR) risks add to the level of unpredictability.

Additionally, the Big “I” is concerned that consumers will face sunsets and exclusion clauses in policies as TRIEA nears expiration without a long-term solution that addresses these issues. That is why this crucially important issue needs to be addressed now.

“The issue of terrorism risk insurance has far too many variables to assess it with the accuracy required to provide adequate and effective private coverage,” says Charles E. Symington Jr., Big “I” senior vice president for government affairs and federal relations. “Of course, the nature of the phenomenon of terrorism renders it impossible to determine when or where an attack may occur, or how serious its effects will be. These facts make it extremely difficult for the insurance marketplace to provide adequate coverage for such a disastrous event.”

The playing field, of course, has changed somewhat since the last time the issue of renewal came before Congress. With Democrats’ ascension to majority status on Capitol Hill, prospects for a continued federal insurance backstop for terrorist attacks have improved, although it is impossible to say exactly to what degree. Some conservative Republicans had expressed concerns about extending the federal role in what they saw as a private marketplace issue.

The Big “I,” which has consistently championed a federal backstop, certainly supports market-based solutions when they are available. But those solutions simply do not exist at this time. The existing marketplace for terrorism risks remains imperfect and, at the very least, the insurance community needs more time to explore the expansion of capacity and the spreading of risk.

“We simply have to be realistic about the capabilities and restraints of the market,” says Brendan Reilly, Big “I” assistant vice president for federal government affairs. “Naturally, the insurance industry has a responsibility to discuss long-term solutions, and we have been working toward creating new ways to deal with this problem in order to protect consumers and our overall economy after TRIEA expires. But frankly, we are not there yet, and that is why it is crucial that Congress extend the federal backstop.”

The Big “I” will continue to work for the extension of TRIEA or similar legislation in the coming months. You can do your part by phoning, writing or visiting your members of Congress and educating them as to why this action is necessary and critical to their constituents and the overall national economy.

Cliston Brown is the former Big “I” director of public affairs/media relations.

Natural Disaster Legislation on the Move

The start of the 110th Congress immediately produced legislation to address the issue of natural disaster coverage for consumers who face natural perils.

Reps. Ginny Brown-Waite (R-Fla.) and Vern Buchanan (R-Fla.) introduced an important bill Jan. 5. The Brown- Waite/Buchanan bill, the Homeowners’ Insurance Protection Act, encourages states to establish catastrophe funds to protect against natural disasters. Additionally, the bill establishes Catastrophe Capital Reserve Funds for private insurers in a bid to keep homeowners’ insurance rates affordable. The proposal intends to help prevent potential insolvencies and make the private insurance market more stable, ultimately making catastrophe insurance more available before and after a major disaster, with the reserve funds helping prevent consumers from being hurt by insurance insolvencies.

The Big “I,” while not explicitly endorsing this bill, nonetheless applauds any measure that will spark discussion on how to deal with this important issue.

“Natural disasters are a national problem that requires a national solution, and we applaud the leadership shown by these members in advancing solutions to this problem,” says Charles E. Symington Jr., Big “I” senior vice president for government affairs and federal relations.

This issue is expected to get much Congressional attention in 2007, and the Big “I” will continue to urge the public and private sectors to work together and find a common solution that will serve consumers and protect taxpayers.