Terrorism insurance and regulatory modernization will dominate the political landscape for the property-casualty industry in 2007, according to its two leading trade associations.

The Washington, D.C.-based American Insurance Association in its annual forecast said, “It is critical that some form of public-private partnership be enacted to address chemical, nuclear, biological and radiological attacks.”

“The insurance market is not a free market,” the AIA points out. “In fact, it is a forced market with states mandating coverage of terrorism-related risks under both workers compensation and standard fire policy laws.”

The Property Casualty Insurers Association of America, based in Des Plaines, Ill., noted that key incoming Democratic chairmen, Sen. Chris Dodd of the Senate Banking Committee and Rep. Barney Frank of the House Financial Services, have made it clear that establishing a long-term solution to the problem of insuring terrorism risks is among their highest priorities.

The current two-year extension of the Terrorism Risk Insurance Act, first enacted in 2002, expires at the end of this year.

The AIA said that if no solution is reached, it will work to have the industry released from all existing state and federal mandates to offer coverage for terrorism risk.

The AIA said it will continue to push for removal of rate restrictions in both commercial and personal lines in target states such as Kansas, New Mexico, New York and North Dakota.

The two groups have split on the issue of an Optional Federal Charter, with the PCI noting that Democratic control of both chambers of Congress will mean federal regulation will in all likelihood be more burdensome than the current state system.

PCI said the special session of the Florida Legislature in January could “have a dramatic impact on how other state legislatures and Congress deal with the growing problem of insuring catastrophic risk.”

The AIA said it will continue to oppose the establishment of state catastrophe funds as well as the proposed federal mechanism.

Special Reports /

TRIA Tops Political P-C Issue For 2007

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