Will TRIA Extension Vote Go To The Wire?

During the session, designed to provide a "Terrorism Update," the three panelists also outlined the difficulties of insuring for an unknown threat that can cost billions.

Extension of TRIA has broad support in the industry, noted Robert P. Hartwig, senior vice president and chief economist for the Insurance Information Institute in New York.

All three panelists–Mr. Hartwig, Jennifer Tomilin, CAN's vice president and chief underwriting officer for workers' compensation, and Timothy P. Brady, a Marsh managing director–in answer to a moderator's question, all said they believed extension would come in the 11th hour next year.

According to insurers, if TRIA extension does not happen this year, it could pose something of a problem for policyholders who seek to take out a 12-month policy in 2005 that extends into 2006, when the TRIA federal backstop could cease.

According to the American Insurance Association, Congressional inaction on extension until late 2005 could cause some insurers to restrict coverage.

Mr. Hartwig said timely renewal of TRIA this year is "in jeopardy" because "there are a limited number of days in the legislative calendar."

According to Mr. Hartwig, modelers project that an anthrax event in New York City could kill 173,000 and hit workers' comp insurers with a $91 billion insured loss.

He noted, however, that the vast majority of events would not be big enough to involve the TRIA backstop coverage.

According to Mr. Hartwig's figures, a study of terrorist attacks worldwide shows that 60 percent of all attacks involve a bomb. Terrorism events involve businesses in 25 percent of cases and the most common victims are civilians.

Mr. Hartwig noted that workers' comp insurers cannot prefund for such losses, meaning "there's not a dime for reserves," and because workers' comp insurers cannot exclude terrorism risk when they provide coverage, "there's 100 percent takeup."

Workers' comp insurers took 6 percent of the loss from the Sept. 11, 2001 terrorist attacks, according to Mr. Hartwig.

Ms. Tomilin said 1,000 New York terrorism fatalities could mean an estimated $474 million loss for workers' comp insurers.

She said that while the Sept. 11, 2001 attack saw most of the loss passed on to reinsurers, the next event would hit primary carriers because the reinsurance market for the coverage dried up.

Workers' comp insurers that are careful to spread their exposure can still be hurt by a major terrorism event because they would have to provide resources to pay assessments to guaranty funds supporting claims against failed insurers, the speakers warned.

In evaluating employers for coverage against terrorism, Ms. Tomilin said her firm asks for information regarding street locations, floor locations and employee shift levels.

New York and Washington are looked on as more likely to be attacked, she noted.

In judging employer buildings, lower floors are seen as more vulnerable to a bomb blast and higher ones as more difficult to evacuate. Buildings with stock traders are viewed as more of a target than, say, a clothing wholesaler, and firms with an international reputation are also a draw for attack, she noted.

"I need to know so much more about a risk," Ms. Tomilin told her audience, noting that her firm takes two-and-a-half hours to evaluate firms with from 300 to 1,000 employees.

Mr. Brady of Marsh said some employers continue to underinsure or resist insuring themselves against terrorism and retain a major financial exposure. Companies are declining to take the coverage because "they're not used to paying this," he said.

Reinsurance for terrorism, he noted, has come back to a certain extent, "but at dramatically different pricing."

The vast majority of employers, he said, are being proactive in taking steps to protect their infrastructure, move to other locations and guard their facilities against attack with concrete "planters" to create a standoff distance that would reduce the impact of a truck blast.