Washington–The chief executive officer of a mutual insurer warned the Senate Banking Committee in a letter that renewal of the Terrorism Risk Insurance Act along the lines being pushed by the White House and conservative members of Congress would make it difficult for small and medium-sized insurers to survive.
"If the Terrorism Risk Insurance Act is not extended along the lines suggested by the Dodd-Bennett bill, companies like [us], which make up the bulk of insurers in the U.S., will be unlikely to survive in the event of the terrorist attack," said Warren W. Heck, chairman and CEO of Greater New York Mutual Insurance Co.
The letter was written to Sens. Richard Shelby, R-Ala., and Paul Sarbanes, D-Md., chairman and ranking minority member, respectively, of the Senate Banking panel.
"Without TRIA–or by reenacting TRIA with a $500 million trigger and 20 percent to 25 percent deductibles, which from the market's perspective effectively amounts to the demise of TRIA–stand-alone terrorism reinsurance would either vanish or cost too much for all but the largest and most profitable companies to buy," Mr. Heck said.
He was commenting on negotiations within the committee for renewal of TRIA along lines proposed by the Treasury Department. Industry lobbyists say Sen. Shelby and the White House are pushing for extension of TRIA along the lines of the Treasury Department report issued on TRIA in June.
Lobbyists indicated that legislation being drafted by staffers for the Republican majority of the House Financial Services Committee is more supportive of smaller insurers, with a lower trigger and retention levels than being pushed by the White House. Democrats, both in the House and Senate, are supporting a simple extension of the bill for two years, something now regarded as unrealistic.
Distribution of a draft bill by majority staffers of the House Financial Services Committee is expected soon. With Congress now on track to remain in sessions through mid-December, talks on a Senate bill have slowed, lobbyists said.
The Treasury report on which Senate negotiations are being based said TRIA should be extended only for a short period; that terrorism insurance should be the responsibility of the private market, not the government; and that the trigger levels for federal support, as well as insurer retention levels, should be high.
The Dodd-Bennett bill calls for TRIA to be extended for two years, does not mandate sunset for federal support of terrorism insurance at that time, and raises current retention levels. The percentage of loss insurers have to keep in the event federal support is triggered would rise only modestly from the current level of 15 percent.
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