Realtors Attack Budget Office TRIA Stance
By Arthur D. Postal, Washington Bureau Chief
NU Online News Service, Jan. 12, 8:25 p.m. EST, Washington?A recent Congressional Budget Office finding that the costs to the economy of "scaling back" federal backstop coverage for terrorism insurance "is likely to be small" is running into heavy fire from the commercial real estate industry.[@@]
In a delayed reaction to a CBO report that questions the need to extend the Terrorism Risk Insurance Act, the Coalition to Insure Against Terrorism claims that the CBO study incorrectly assumes that private-sector reinsurers will fill the coverage gap if TRIA is allowed to expire Dec. 31.
In a statement by Martin L. DePoy, vice president for government relations at the National Association of Real Estate Investment Trusts, CIAT said that policymakers represented by the CIAT "have seen little evidence to suggest that reinsurers are any closer to returning to the market they fled after the attack on America."
Mr. DePoy added that CIAT can agree with the author of the CBO paper on at least one point: that without TRIA ?an especially large loss from a terrorist attack would be likely to produce another episode of scarce coverage, rising prices, and uninsured assets.' That is why we urge Congress to extend the backstop through 2007 without delay."
"This ?new' CBO study is anything but." Mr. DePoy said. "Writer David Torregrosa raised the same issues and made similar conclusions in remarks to the Society of Government Economists in March of 2002?nine months before the Terrorism Risk Insurance Act (TRIA) was even enacted!" Mr. DePoy said.
"Beyond using the paper as a forum for his dated personal views, Mr. Torregrosa largely misses the point: unlike natural disasters, terrorism is a unique catastrophic risk characterized by an ever changing choice of man-made attack modes and targets," Mr. DePoy said.
One of the conclusions of the CBO report that is raising hackles within the insurance industry is a conclusion that eliminating the program could result in "gains in economic efficiency." One reason would be that letting the program expire could mean reduced losses in the event of an attack "if the resulting higher premiums encouraged firms to adopt measures to reduce losses."
For example, the report said, an extension of TRIA could discourage business from taking steps to reduce terrorism exposures, such as retrofitting existing facilities and designing new ones to mitigate the risk.
Charles E. Symington Jr., senior vice president of federal government affairs at the Independent Insurance Agents and Brokers of America, reacted that, "To relate acts of terrorism to risks like fire or weather-related events is like comparing apples and oranges."
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