WASHINGTON–Trade groups representing mostly smaller insurershave split over what provisions should be part of legislation toextend government supports for insurers' high-level terrorismlosses.

The disagreements involve the American Insurance Association onone side and paired against it the Property Casualty InsurersAssociation of America (PCI) and National Association of MutualInsurance Companies on the other.

Among other things PCI and NAMIC feel the AIA jumped the gun inannouncing an agreement with the Coalition to Insure AgainstTerrorism over a proposed provision for an extension of theTerrorism Risk Insurance Act.

Part of the agreement between the AIA and the Coalition wouldrequire all property insurers to sell insurance for such attacks,with the federal government stepping in to cover losses only abovea certain amount.

The AIA/CIAT deal on retentions also draws criticism, because“lowering insurer retentions below the current 20 percent is veryimportant to the medium-sized and smaller insurers,” a letterwritten to AIA by PCI and NAMIC said.

“The document appears to accept the 20 percent level as apermanent feature of the program without considering the consumerbenefits of lower retentions,” the letter said.

Another concern is that the agreement between the AIA and CIATconcedes a trigger for federal aid in the event of a terrorismattack “no higher than the current $100 million, with possiblespecial provision for small insurers.”

The letter from PCI and NAMIC to AIA obtained by NationalUnderwriter said, “Throughout the industry discussions over thepast year and in virtually all our public statements about thisissue, our organizations have been very explicit about our supportfor reducing the future program trigger to at least $50 million, oreven lower.

“This is a vital issue for medium and smaller insurers who,collectively, make up over 90 percent of the TRIA-writing companiesin the industry,” the letter said.

“We cannot support, and urge AIA not to support, a statement ofprinciples that could be interpreted to imply that a $100 milliontrigger is appropriate,” the letter said.

It added that the groups “do not believe that a core concern ofour members should be treated as a 'possible specialprovision.'”

“Finally, we are concerned that including such a reference willbe seen by those who oppose the terrorism insurance programentirely as an 'opening bid' in negotiations and may result in aneven higher trigger ultimately,” it said.

The letter was written yesterday, apparently just hours afterAIA and CIAT announced their support for a common approach onprovisions to be contained in legislation renewing TRIA, whichexpires Dec. 31.

The agreement was signed against the background of a hearingbeing held today by the Capital Markets Subcommittee of the HouseFinancial Services Committee on what specific provisions theindustry needs in a bill renewing TRIA.

The letter to Mark Racicot, president of the AIA, was signed byJune Holmes, interim CEO of PCI, and Chuck Chamness, president andCEO of NAMIC.