Speak Truth To Power

This country would be a lot better off if we had a RiskManagement Czar–someone to identify exposures, put loss controlmeasures in place, and make sure the worst-case scenarios areinsured. Perhaps then we would be better prepared for anothernatural disaster such as Hurricane Katrina or man-made catastrophelike the Sept. 11, 2001 terrorist attack.

Some will claim that we already have a risk manager–the head ofthe Department of Homeland Security. However, what I've seen out ofWashington in terms of disaster mitigation, catastrophe responseand the debate over terrorism insurance leaves me longing for atrue federal risk manager.

The situation in New Orleans never should have been this bad.Any risk manager worth their salt would have insisted on fortifyingthe levees to withstand a Category 5 storm, or at least hadproactive evacuation and disaster recovery plans ready to roll.

A responsible risk manager also would have put a more effectiveflood insurance program in place. While the feds made the rightcall to create the National Flood Insurance Program, it wasseriously flawed as too many people who should have bought thecoverage passed on the opportunity.

Instead, our government officials are reduced to desperatemeasures, proposing retroactive flood coverage (which woulddiscourage anyone from ever buying the insurance again) or hasslingprivate carriers to pay claims on risks they never covered.

Our government's response to terrorism has been even worse. TheDepartment of Homeland Security is another bloated, ineffectivegovernment bureaucracy. While we are given vague, color-codedwarnings, with no specific calls to action, airport securityremains spotty, cargo ships and nuclear facilities are extremelyvulnerable, and our borders have gaping holes.

The one sensible step taken by the government–although not untila year after the Sept. 11 attacks–was to pass the Terrorism RiskInsurance Act.

Insurers did not get nearly enough credit for helping theeconomy recover and individual survivors get their lives andbusinesses back together following the World Trade Center'sdestruction.

Without TRIA's federal reinsurance backup, the market forterrorism coverage would have collapsed. Those with no choice butto write the exposure–such as workers' compensation carriers–eitherwould have exited high-risk areas, sent premiums soaring, or runthe risk of financial ruin by staying in the market.

Despite these facts, Congress is dragging its feet on extendingthis vital risk management program, which sunsets at year's end.This week, a trial balloon was floated about a "silo" approach,with the level of federal support depending on the line ofbusiness, but action is unlikely until the 11th hour. Complicatingmatters is an ignorant suspicion that we are somehow "bailing out"private carriers with TRIA.

The truth is we need a functioning, financially secure insuranceindustry if we expect to recover from another major terroristattack–or another monumental natural disaster, for that matter.

The problem is the government is so skeptical about theinsurance industry's value, that whatever Congress hears about TRIAfrom carriers and producers is viewed as self-serving propaganda.That's why risk managers need to lobby Washington in defense ofTRIA.

Call your representatives in the House and Senate. Remind themyou are a consumer, and explain why TRIA is so critical to yourbusiness and the overall economy. Warn them about the risks ofgoing bare–a fate endured by far too many devastated people in theGulf.

Sam Friedman is NU's Editor-In-Chief. He may be reached [email protected].

"The problem is that the government is so suspicious of theinsurance industry, whatever Congress hears about TRIA fromcarriers and producers is viewed as self-serving propaganda."