Consumer Federation: Let TRIA Program Die

"Our study clearly documents that the insurance industry is more than ready to stand on its own two feet and that taxpayer backup should end," said J. Robert Hunter, CFA's director of insurance.

"The ability of the industry to insure against terrorism is enormous and growing, profits are quite substantial; and the financial condition of insurers overall is rock solid," he said.

CFA said that only nine communities in the nation are at either a high or moderate risk of being the target of a terrorist attack. Those at high risk are New York City, San Francisco County, the District of Columbia and Cook County, Ill., which includes Chicago.

The communities at moderate risk, according to CFA, are Suffolk County, Mass., which includes Boston; King County, Washington, which includes Seattle; Los Angeles County; Harris County, Texas, which includes Houston; and Philadelphia County.

CFA said that if Congress does decide to continue the TRIA program, it should consider a plan that focuses on these communities.

In addition, CFA said, the industry-wide deductible for terrorism coverage should increase to a pretax figure of $77 billion for the first year of the program, and should then increase by another $10 billion per year.

CFA also said that the share of losses that insurers must pay above the deductible should increase from 10 percent to 15 percent.

Insurance companies should pay actuarially sound premiums for terrorism reinsurance provided by the government, if not a little higher, CFA added. Charging rates that are slightly higher, CFA said, will encourage private market mechanisms to compete by offering lower rates.