Insurer Message Loud And Clear On TRIA Needs

New York

The U.S. Treasury Department has received a “loud and clear” message from the insurance industry that a decision is needed soon on whether to extend the mandatory make-available provision in the Terrorism Risk Insurance Act, a Treasury official here said.

David Brummond, legal counsel for the Treasury Risk Insurance Program, made his comments at the National Association of Insurance Commissioners meeting here.

Under TRIA, all commercial property-casualty, workers' compensation and surety insurers have to offer terrorism coverage, and these carriers are eligible for federal assistance in paying terrorism claims once the amount exceeds the deductible levels set by the law.

However, the mandatory make-available provision in TRIA applies only to 2003 and 2004, giving the Treasury secretary until Sept. 1, 2004 to decide whether to extend that requirement into 2005.

Mr. Brummond said that Treasury Secretary John Snow has received the message “loud and clear” that Sept. 1 is too late for him to make that decision.

Treasury is soliciting input from policyholders and insurers on whether TRIA's make-available provision should be applied to the third year, noted Julie Gackenbach, assistant vice president of government relations at the Des Plaines, Ill.-based Property Casualty Insurers Association of America.

“They are hoping that will allow them to use that information to then go ahead and make a decision much earlier in the process maybe more like a June time frame as opposed to September,” she said.

The NAICs terrorism insurance implementation working group has also started working on drafting a resolution urging Congress to take action to continue the federal backstop beyond its expiration date of Dec. 31, 2005.

The regulators said they will also draft a letter to Congress to be signed by commissioners urging lawmakers to start putting TRIA's extension on their agenda.

“We are very happy that the commissioners recognize the urgency of this issue that they understand the importance of Congress acting sooner rather than later,” said Ms. Gackenbach. “We are pleased that they are moving in an expeditious manner. We recognize the importance it's too late to wait until next year. We really need to start taking action on this now.”

Ms. Gackenbach added that ultimately there will be questions on what exactly the new package should look like, including the level of insurer risk retention, which has been causing problems for the industry.

Mr. Brummond also told regulators that his department has been looking for a contractor to administer claims and processing in case there is ever a covered terrorism event in the United States.

He said the department has decided to use a private contractor to take care of these processes. Treasury officials are reviewing bids and hope to have the contract awarded in the next 90 days.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, March 19, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

Special Reports /

Insurer Message Loud And Clear On TRIA Needs

Related Stories

Recommended For You