NU Online News Service, Sept. 7, 2:02 p.m. EDT
An amendment that would “sunset” or end the Terrorism Risk Insurance Act (TRIA) in 2013 will be offered Thursday as an amendment to the legislation reauthorizing the National Flood Insurance Program (NFIP).
Currently, TRIA is scheduled sunset in 2014 unless reauthorized by Congress.
Word that Sen. Roger Wicker, R-Miss., would offer the amendment sent the insurance industry scrambling to persuade Wicker to drop his amendment, or, failing that, line up enough support to defeat it.
In response, Wicker says, “Terrorism insurance is an important product for many across our country, but a private market may be better suited to insure against these risks rather than a government program.”
Wicker will introduce his amendment just a few days before the anniversary of the terrorist attacks on the East Coast on Sept. 11, 2001, and a month after Guy Carpenter, the reinsurance broker subsidiary of Marsh & McLennan Companies, issued a new report on the issue.
The report says that while acts of global terrorism peaked in 2006, at more than 14,400, acts of terrorism “still remain at historically high levels at more than 10,000 in 2010 alone.
Moreover, the report says that while terrorism risk insurance is currently “abundant” in the marketplace, “due to its unpredictable nature, insurers and reinsurers [continue to] struggle to quantify its risk.”
A letter written by the Real Estate Roundtable today to Wicker urges him to withdraw the amendment.
“On behalf of the America’s real estate industry and the businesses that drive the U.S. economy, we encourage you to withdraw this amendment,” the letter states.
It adds that the current federal terrorism risk insurance program “has been a tremendous success,” and the program “costs virtually nothing if an event does not occur.”
The letter also says that if an event does occur, TRIA has a specific cost-sharing approach for the first $100 billion of annual losses by businesses due to terrorist attacks, explicitly leaving it to Congress to make additional choices were an attack to cost even more.
Importantly, the letter says, there is a recoupment provision that would assess policyholders to repay taxpayers for any funds advanced.
“Moreover, it serves as an important tool to minimize the severe economic disruption that almost certainly will occur from a future terrorist attack,” the letter says.
“Private markets alone will not provide the level of terrorism insurance our economy demands,” concludes the letter.
Matt Gannon, assistant vice president of federal affairs for the National Association of Mutual Insurance Companies (NAMIC), says, “The committee, and the Senate as a whole, will have ample opportunity to debate the merits of the TRIA program over the next few years as its expiration date approaches. Sen. Wicker’s amendment is not relevant to the NFIP, and we hope it does not distract the committee from the urgent need to reform and reauthorize this vital program.”