Insurers Concerned Over TRIA Bill Retention Issue
By Steven Brostoff, Washington Editor
NU Online News Service, June 30, 3:51 p.m. EDT, Washington?Insurance company and agent groups have written House Financial Services Committee Chairman Mike Oxley, R-Ohio, that a recently introduced bill to extend the Terrorism Risk Insurance Act is a "positive first step" although the industry has "concerns."[@@]
The letter stopped short of a full endorsement of H.R. 4634, legislation which would extend TRIA for two years through 2007 but force insurance companies to assume a larger share of terrorism-related claims.
But the groups said they want to work with all interested parties to try and enact extension legislation this year.
Although the letter to Rep. Oxley does not outline industry concerns, sources tell National Underwriter that insurance companies cannot handle the increases in deductibles and retention levels contained in H.R. 4634.
Under the current TRIA program, there is a 15 percent deductible before an insurance company can receive federal reinsurance assistance. H.R. 4634 would increase the deductible to 20 percent in 2007, the final year of the program.
As for retention, the current law establishes overall industry retention in 2005 of $15 billion. H.R. 4634 would increase the retention levels to $17.5 billion in 2006 and $20 billion in 2007.
One industry representative, who asked not to be identified, said that even under the current program most insurance companies would not receive any federal assistance following a major terrorist attack.
Increasing the industry's share of terrorism-related losses, he said, could create significant financial problems for insurers if there is an attack.
The industry's letter said that TRIA has helped stabilize the commercial insurance marketplace and has improved the affordability of terrorism coverage despite the very real, ongoing threat of a catastrophic attack.
Company groups signing the letter include the Reinsurance Association of America, the Property Casualty Insurers Association of America, the National Association of Mutual Insurance Companies the American Insurance Association, the Financial Services Roundtable, the Surety Association of America and the American Association of State Compensation Insurance Funds.
Producer groups signing the letter include the Council of Insurance Agents and Brokers, the Independent Insurance Agents and Brokers of America, and the National Association of Professional Insurance Agents.
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