The Property Casualty Insurers Association of America and theAmerican Insurance Association are voicing concern to the TreasuryDepartment about its plan for making payments to and getting fundsfrom insurers following a terrorism incident.

PCI is asking Treasury to rethink how it deals with "long-tail"claims, suggesting that a perception that all claims could beresolved within 10 years may be too optimistic.

Likewise, AIA opposes the timeframe Treasury proposed to cut offpayments for a particular event, called the "final netting date."The cutoff should be no earlier than 10 years, AIA said in a letterthat was signed by J. Stephen Zielezienski, senior vice presidentand general counsel.

The groups responded to aTreasury request for comments on how Treasury would reimburseinsurers for a loss from a terrorism attack and, conversely,collect funds it is due under the law, the Terrorism Risk InsuranceAct. The comment period closed Oct. 4. Treasury received 11comments on the proposal.

In a letter signed by David Golden, PCI senior director ofcommercial lines, PCI said: "We are concerned that Treasury is insome ways attempting to create a 'one-size-fits-all' procedure thatmay not be appropriate for all insurers in every circumstance."

"In crafting the final netting rule, great care must be taken toensure that the TRIA program responds equally well for the smallinsurer with risks heavily concentrated in the area of a terrorismincident, the midsize insurer with a concentration of business inthe affected area, and the large insurer exposed through manynational account customers with locations in the area attacked,"the letter continued.

"TRIA must also work as well for general liability and workers'compensation as it does for property coverage," Mr. Goldenadded.

Regarding "long tails," the PCI letter noted that the proposedrule sets no fixed time period for which a program year will beleft open before a final netting date is established, but thatTreasury indicates it would likely be five-to-seven years followinga qualifying terrorism incident, with a likely maximum of 10years.

"PCI supports Treasury's proposal that the final rule should setno fixed time period for which a program year should be left open,"Mr. Golden said in the letter.

However, he cautioned that Treasury's projection of a likelymaximum of 10 years "may not always be sufficient."

"While property claims may lend themselves to closing in thefive-to-10-year timeframe,…liability and workers' compensationclaims may take longer, perhaps exceeding 15 years in somecircumstances," the letter states.

Mr. Zielezienski said Treasury must consider the lines ofbusiness where losses occur to avoid putting companies with a largeproportion of long-tail claims at a disadvantage.

The AIA also took issue with a proposed Treasury rule onworkers' compensation, which states that an "insurer may provideupdated information based on the number of workers' compensationclaimants previously reported," but that an insurer may not reportany "increased workers' compensation loss amounts based on anincrease in workers' compensation claimants."

The AIA said, "This prohibition is particularly troublesome asinjuries to workers' compensation claimants are often latent innature and do not manifest themselves until later in life."

Mr. Zielezienski suggested that Treasury provide an additionalpublic comment period.