Washington–An American Academy of Actuaries subgroup has addedits voice to the chorus calling for a permanent solution to theproblem of insuring terrorism risk.

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The Academy's Terrorism Risk Insurance Act subgroup said in astatement that the "magnitude of potential insurance claims due toterrorist events makes permanent federal legislation necessary inorder to make terrorism coverage widely and readily available."

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This conclusion was based on an analysis of the potentialimpacts of a terrorist attack and how insurance companies couldreact to sudden changes in their perceived exposure tocatastrophes.

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"Because of the potential for terrorist attacks that cause verylarge losses, the subgroup does not believe there is any strategythat could develop sufficient terrorism insurance capacity withoutsome form of legislation to limit insurer liability should theseevents occur," the subgroup said in its statement, which was sentto congressional leaders and Treasury Secretary John Snow.

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Federal involvement is needed in any long-term solution to theterrorism insurance problem, the subgroup said, because of theenormous size of potential losses stemming from a terroristattack.

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"Terrorists with access to nuclear, biological, chemical andradiological weapons of mass destruction have the potential tocause single-event catastrophic insured losses many times the sizeof the total insured losses from Sept. 11, 2001," the subgroup saidin its statement.

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It added that, "Modelers now estimate that terrorists with suchweapons could cause insured losses ranging up to about $700billion, depending on weapon type and location."

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Although the subgroup acknowledged that it had not reviewed thecurrent proposals for legislation to extend TRIA, it noted that"certain key results of the subgroup's analysis are relevant" tothe debate on those bills.

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The house TRIA extension legislation, H.R. 4314, has been passedby the Financial Services Committee and is pending.

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A markup on the bill has not yet been scheduled, according tocommittee spokesman Terry Shawn.

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The House legislation uses what is being called the "silo"approach, establishing different deductibles and thresholds forgovernment participation for different lines of insurance and wouldalso include group life.

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The White House has expressed strong opposition to expanding theTRIA program to include group life and has supported the concept ofsignificantly increasing the amount of damages that would have tobe borne by the insurance industry before the federal governmentbecame involved.

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Senate bill, S. 467, was passed on Nov. 18. It does not includegroup life and is more in line with the administration'sthinking.

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