Policy expert Robert Gordon with the Property andCasualty Insurers Association of America says he is "not overlyoptimistic" Congress will move promptly to reauthorize theTerrorism Risk Insurance Act before it sunsets next Dec. 31.

Gordon, PCI's senior vice president of policydevelopment and research, said during a conferencecall today that Congress may continue towait until the last minute before re-upping TRIA—just as it hasdone for two prior reauthorizations of the federalbackstop since it was signed into law in November 2002.

Congress has chosen to do so even though the program is"critical," Gordon said.

Moreover, Gordon said, Congress is unlikely to act even thoughthere is already anecdotal evidence that the uncertainty of a TRIArenewal is already impacting the insurance industry.

Gordon also noted that in the past insurers have inserted ridersin WC policies that indicate they are null and void if TRIA is notreauthorized. Reinsurance capacity, in the past too, has dried up,as the markets gird for potential shutdown of theprogram. 
 
PCI unveiled a new poll indicating that 79.5percent believe that the federal government would bear themajor cost of paying for a terrorist event, and 67.6 percentsupport renewal of the program. The poll also showed that 90.1percent of respondents believe that paying for a terrorist attack"should be at least in part a responsibility of the federalgovernment."

The poll also indicated that the rural/urban divide on the issueis virtually "nonexistent," according to the polling firm, GSStrategy Group.

Gordon and Tom Litjen, a PCI vice president, scheduled themeeting in advance of a hearing on the issue tentatively scheduledfor Sept. 19th by the House Financial Services Committee. Litjencalled the hearing of "very serious importance," and said it islikely to be the first of several hearings Congress will hold onthe issue.

Gordon added that PCI has submitted papers dealing with theprogram to the House FSC at the committee's request. Heacknowledged that members of the committee are seeking ways toamend the program, but quickly noted that any "changes would seegreater costs to consumers."

Gordon said that terrorism risk "is clearly a national problem."He further noted that TRIA only protects against a nationalterrorist attack.

As for changes, Gordon said PCI would certainly support changesin the TRIA program's certification program so that the Treasurysecretary has clear rules he would follow on the deadline and othercomponents dealing with certifying a terrorist event.

Gordon also addressed a policy analysis issued Tuesday by thelibertarian Cato Institute. The analysis "suggests that the programshould sunset as scheduled in 2014, thus ending this form ofcorporate welfare," Cato officials said.

The paper argues that, "If there was some ambiguity about theprogram's need before, there is none now." The analysiscontinued, "Terrorism risk is not more severe than otherinsurable risks such as natural catastrophes, and a federalbackstop stakes public money to protect the insurance industry, andsubsidize the terrorism risk insurance premiums for commercialpolicyholders.

"The private market is capable of underwriting this risk," thepaper concluded.

Gordon responded by saying the Cato assertions are "simplyfalse."

"Terrorism risk is not like natural catastrophes because it doesnot fall within the definition of an insurable risk," Gordon said.The two risks are "not comparable at all," he said, noting thatthere is strong capacity for reinsurance for natural catastrophes,but none for terrorism.