Efforts are underway to repair a rift within theproperty-casualty insurance industry on the basic principles thatshould be sought in legislation reauthorizing the Terrorism RiskInsurance Act.

Specifically, the American Insurance Association and theCoalition to Insure Against Terrorism, which drafted a jointnegotiating approach, are proposing concessions that would lowerthe threshold level for federal government involvement in payingclaims resulting from a terrorist attack.

Initially, the AIA/CIAT agreement proposed a trigger for federalaid in the event of a terrorism attack “no higher than the current$100 million, with possible special provision for smallinsurers.”

The Property Casualty Insurers Association of America and theNational Association of Mutual Insurers Companies, concerned aboutthe impact on small insurers, have supported lowering the triggerto $50 million or lower.

The new proposed language being put forth by AIA/CIAT is thatthe industry position should be an “event trigger that providesmeaningful opportunity for small-company participation,” accordingDennis Kelly, an AIA spokesperson.

That is likely to assuage the concerns of PCI and NAMIC, whichboth said the previous AIA/CIAT position on the trigger waseconomically unfeasible for their members. According to informationprovided to NU by industry sources close to the talks, however, theAIA/CIAT position on claims resulting from a chemical, nuclear,biological and radiological attack in proposed TRIA renewallegislation still could make smaller insurers represented by PCIand NAMIC uncomfortable.

That's because the AIA/CIAT approach on CNBR is still likely toimply industry support for legislation that would require insurersto “make available” insurance to cover CNBR risks, the sourcessaid.

The initial rift between the groups developed when, without theknowledge of trade groups representing smaller insurers, the AIAand CIAT unveiled their agreement on the eve of a hearing heldApril 24 on the issue by the Capital Markets Subcommittee of theHouse Financial Services Committee. The subcommittee leader hadasked the trade to submit concrete views on what they wanted in arenewed TRIA.

The Financial Services Committee wants to move promptly to get abill through the committee and then through the House.

The current bill expires Dec. 31, and the Democratic leadershipin both the House and the Senate has vowed to both extend andexpand the current provisions in TRIA. Republicans in Congress,however, are much more reluctant to extend and expand the bill, andthe Bush administration is also opposed, although it is unlikely toveto any legislation that is finally hammered out by Congress,according to lobbyists and congressional staffers.

PCI and NAMIC responded to the initial AIA/CIAT position byfiring off a letter complaining that the AIA/CIAT agreement wentagainst a commitment by all p-c industry groups to present a jointposition on negotiating principles in a renewed TRIA bill.

Another hurdle to industry agreement centers on insurerretentions of terror losses.

The original AIA/CIAT agreement called for all property insurersto sell insurance for terror attacks–the so-called “make available”provision–with the federal government stepping in to cover lossesonly above a certain amount.

In a letter to AIA last week, PCI and NAMIC said the language ofthe AIA/CIAT agreement appeared to accept the current retentionlevel–20 percent–”as a permanent feature of the program withoutconsidering the consumer benefits of lower retentions.”

PCI/NAMIC said in its letter that “lowering insurer retentionsbelow the current 20 percent is very important to the medium-sizedand smaller insurers.”

A PCI official said Wednesday that the trade group would have nocomment on the compromise language being circulated by AIA/CIAT,saying the ball is “in the AIA's court.”

AIA's Mr. Kelly confirmed that talks were continuing. Hecontended there were “very little differences” between the AIA/CIATposition and that of PCI/NAMIC.

“What has come out of talks since we released the principles isthat the language related to the trigger provisions is stronger,”Mr. Kelly said, confirming the “language was strengthened to callfor an event-trigger that 'provides meaningful opportunity forsmall-company participation.'”

“That means we want anything done to lower the trigger,” hesaid.

He also contended that the wording is “recommendedprinciples.”

“There is nothing set here in stone,” he said.