NAIC: Treasury Official Discusses TRIA Provisions

Under the TRIA enacted in 2002, all commercial property-casualty, workers' compensation and surety insurers have to offer terrorism coverage, and these carriers are eligible for federal assistance in paying terrorism claims once the amount exceeds the deductible levels set by the law.

However, the mandatory make-available provision in TRIA applies only to 2003 and 2004, giving the treasury secretary until September 1, 2004, to decide whether to extend that requirement into 2005.

Mr. Brummond, speaking at the NAIC's terrorism insurance implementation working group session, said that Treasury Secretary John Snow has receive the message "loud and clear" that Sept. 1 is too late for him to make that decision.

"The Treasury Department is working on a request for a formal comment which would probably be going out in the next 10 days," commented Julie Gackenbach, assistant vice president of government relations at the Des Plaines, Ill.-based Property Casualty Insurers Association of America.

Ms. Gackenbach noted that the Treasury is soliciting input from the policyholders and insurers on whether TRIA's make-available provision should be applied to the third year. "They are hoping that will allow them to use that information to then go ahead and make a decision much earlier in the process. Maybe more like a June timeframe as opposed to September."

Mr. Brummond also told regulators at the terrorism insurance implementation working group that his department has been looking for a contractor to administer claims and processing in case there is ever a covered terrorism event in the United States.

He said the department has decided to use a private contractor to take care of these processes. The Treasury Department has put bids out and they are now in, Mr. Brummond said?department officials are now in the process of reviewing bids and are hoping to have the contract awarded in the next 90 days.

The NAIC's terrorism insurance implementation working group has also started working on drafting a resolution urging Congress to take action to continue the federal backstop beyond its expiration date of Dec. 31, 2005.

In the coming days, the working group plans a series of conference calls to receive input from interested parties and put a resolution together. The regulators said they will also work on drafting a letter to Congress?to be signed by commissioners?urging lawmakers to start putting the TRIA extension on their agenda.

"We are very happy that the commissioners recognize the urgency of this issue?that they understand the importance of Congress acting sooner rather than later," commented Ms. Gackenbach. "We are pleased that they are moving in an expeditious manner. We recognize the importance?it's too late to wait till next year. We really need to start taking action on this now."

Ms. Gackenbach added that, ultimately, there will be questions on what exactly the new package should look like, including the level of retention, which has been causing problems for the industry. "We look forward to working with commissioners to resolve these issues," she said.