Will TRIA Extension Vote Go To The Wire? Three experts think Congress wont act until 11th hour, putting policyholders at risk







Mr. Hartwig said timely renewal of TRIA this year is "in jeopardy" because "there are a limited number of days in the legislative calendar."

During the terrorism session, the three panelists also outlined the difficulties of insuring for an unknown threat that can cost billions.

According to Mr. Hartwig, modelers project that an anthrax event in New York City could kill 173,000 and hit workers comp insurers with a $91 billion insured loss. He noted, however, that the vast majority of foreseeable events would not be big enough to involve the TRIA backstop coverage, leaving carriers exposed to many billions in potential losses.

Mr. Hartwig noted that workers comp insurers cannot prefund for such losses, meaning "theres not a dime for reserves" set aside specifically to pay terrorism-related claims, and because workers comp insurers cannot exclude terrorism risk when they provide coverage, "theres 100 percent takeup" by buyers, as opposed to other lines, in which insureds can pass on terrorism insurance.

Workers comp insurers took 6 percent of the loss from the Sept. 11, 2001 terrorist attacks, according to Mr. Hartwig.

Ms. Tomilin said 1,000 New York terrorism fatalities could mean an estimated $474 million loss for workers comp insurers.

She said that while the Sept. 11, 2001 attack saw most of the loss passed on to reinsurers, the next event would hit primary carriers because the reinsurance market for the coverage dried up.

Workers comp insurers that are careful to spread their exposure can still be hurt by a major terrorism event because they would have to provide resources to pay assessments to guaranty funds supporting claims against failed insurers, the speakers warned.

In evaluating employers for coverage against terrorism, Ms. Tomilin said her firm asks for information regarding street locations, floor locations and employee shift levels. New York and Washington are looked on as more likely to be attacked, she noted.

In judging employer buildings, lower floors are seen as more vulnerable to a bomb blast and higher ones as more difficult to evacuate. Buildings with stock traders are viewed as more of a target than, say, a clothing wholesaler, and firms with an international reputation are also a draw for attack, she noted.

"I need to know so much more about a risk," Ms. Tomilin told her audience.

Mr. Brady of Marsh said some employers continue to underinsure or resist insuring themselves against terrorism and retain a major financial exposure. Companies are declining to take the coverage because "theyre not used to paying for this," he said.

Reinsurance for terrorism, he noted, has come back to a certain extent, "but at dramatically different pricing."

The vast majority of employers, he said, are being proactive in taking steps to protect their infrastructure, move to other locations, and guard their facilities against attack with concrete "planters" to create a standoff distance that would reduce the impact of a truck blast.


Reproduced from National Underwriter Edition, September 16, 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.




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