Why do so many people still believe TRIA is nothing but ahandout to the insurance industry, when it is so obvious that themarket cannot function without Uncle Sams support?

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Oh, sure, insurers were able to come up with over $20 billion tocover World Trade Center losses, making it one of the worst insureddisasters ever, but the private terrorism insurance market promptlydried up. Theres no way anyone would have written the coverage ifCongress hadnt passed TRIA, and then extended it until the end of2007other than workers comp carriers, of course, who have no choicein the matter.

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However, even with the Terrorism Risk Insurance Act providing afederal reinsurance backstop, private carriers arent exactly beingleft off the hook here.

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Indeed, the individual insurer deductible to trigger coverageunder TRIA this year is 17.5 percent of 2005 direct earnedpremiumsjumping to 20 percent of 2006 premiums next year.

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And the industry retention triggerjust $10 billion in 2003–isnow $25 billion, rising to $27.5 billion next year.

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That doesnt sound like a bailout to me! The industry must lose afortune before Uncle Sam comes to the rescue. Thats not a bad dealto force carriers to write this still very unpredictable,high-severity exposure.

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Thanks to TRIA, coverage is available, and more and more buyersare taking carriers up on the offerwhile premiums for the risk arefalling, as we reported last week. (Click here for the full story.) But if TRIA is allowed to expire, therug will be pulled out of the market so quickly, the entire economycould be sent tumbling.

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Hopefully, the report on the terrorism market due from thePresidents Working Group on Financial Markets by Sept. 30 willreflect these realities and serve as a wakeup call to the Feds, butI am not overly confident that the Bush Administrationnot exactlyknown for its policymaking integritywill back up the industry onthis critical point.

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What will it take to convince Congress and an extremelyskeptical White House to get on board once and for all on the needfor federal terrorism reinsurance? What are your thoughts???

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