Treasury Extends TRIA ?Make Available' Provision

Treasury Extends TRIA ?Make Available' Provision

By Daniel Hays

NU Online News Service, June 18, 4 :07 p.m. EDT?The Treasury Department announced today that it has extended the "make available" provisions of the Terrorism Risk Insurance Act through 2005, the third year of the federal Terrorism Risk Insurance Program.[@@]

Insurance trade groups in response to the move repeated their calls for a renewal of the entire TRIA program, which provides a federal backstop for carriers providing the coverage and is due to expire on Dec. 31, 2005.

The "make available" provisions of TRIA require that, from the date of enactment (Nov. 26, 2002) through Dec. 31, 2004, each insurer must make available, in all of its commercial property and casualty insurance policies, coverage for losses due to covered acts of terrorism.

Coverage must not differ materially from the terms, amounts and other coverage limitations applicable to losses arising from events other than acts of terrorism.

The act requires that the secretary of the Treasury determine whether the "make available" provision should be extended through the third and final year of the program by Sept. 1, 2004.

"We're very happy to see that the Treasury Department made the decision earlier than the legislation required," commented Charles Symington, senior vice president for government affairs with the Independent Insurance Agents & Brokers of America.

Treasury Secretary John W. Snow said that his department's action ensured that "our overall evaluation of the program's success is based on information and assumptions that are consistent and that there's no changing of the rules in the middle of the game."

He said the TRIA insurance program has been "an important confidence builder as this country recovered from the attacks of Sept. 11 and the recession."

Despite this comment by Mr. Snow, his department's announcement said it is "premature to draw conclusions about the need to extend TRIA, either temporarily or permanently."

A further decision on whether to continue the federal backstop program for terrorism insurance under TRIA is under discussion in Congress, and a Treasury study of the overall effectiveness and success of the act is due in June 2005.

In making its determination on "make available,'' Treasury noted it had sought the perspectives of both users and providers of terrorism insurance, and had received almost 200 responses during a comment period that ended June 4.

Treasury said the comments showed a widespread belief that the "make available" provisions have contributed to the effectiveness of TRIA by providing customers with offers of terrorism risk insurance that would otherwise have been unavailable.

The department said it also found that it is widely believed that the "make available" requirement has contributed to the affordability and availability of terrorism risk insurance under the TRIA program, and may have increased the attention devoted by insurers to questions of capacity to offer coverage.

Treasury noted that while little evidence was provided in direct support of these views, there also was little or no evidence presented that the "make available" provisions had harmed affordability, availability, or capacity.

The Treasury said it issued the extension in advance of the Sept. 1, 2004 deadline "to avoid any potential disruption in the terrorism risk insurance market."

A survey by Treasury is underway for a congressionally mandated study of TRIA's overall effectiveness. It involves a nationwide sample of policyholders, insurers and reinsurers to obtain a broad view of the market conditions and dynamics, the agency noted. When the survey is complete, it will be followed by study, analysis and a final report to Congress, Treasury said.

"Recommendations at this time regarding the reauthorization of TRIA prior to the conclusion of our own study would be premature," Treasury said.

Stef Zielezienski, vice president and general counsel for the American Insurance Association in Washington, said Treasury's early decision on the "make available" requirement was in response to calls for an extension from policyholders and members of Congress who feel "the private terrorism insurance market has not yet stabilized."

"We now urge Congress to take the next, much-needed step to secure our economy against foreign terrorist attacks by extending the entire program for two years," Mr. Zielezienski said.

Multi-year terrorism policies written after Jan. 1, 2005 would extend to a point where there might be no backstop, so insurers must consider this in setting coverage, AIA said.

Mr. Symington of the Alexandria, Va.-based IIABA called for the department to show haste in reporting back to Congress on the overall effectiveness of TRIA before the June 2005 report deadline. "We support a two-year extension of the act itself and would like to see Congress and the administration act as soon as possible."

He said his group is very encouraged that a bipartisan group of 184 members of the House of Representative had previously written Mr. Snow seeking extension of both the make-available provision and extension of TRIA.

Mr. Symington said that without extension of TRIA's make-available provision, "you would have seen an availability problem and a number of commercial policyholders would have found it difficult to obtain terrorism insurance with resulting negative economic impact" across the entire economy.