I planned on addressing this question this month, but then I came upon Editor Phil Gusman's editorial in his March 14th issue of Insurance Advocate, our regional sister publication that is distributed in the Northeast. Now, I could have plagiarized the nice young man and usurped his work without credit, since he reports to me and probably wouldn't have complained (much). Or I could have paraphrased him, but it wouldn't have come across as well. And besides, he deserves the recognition and exposure to a wider audience. Here's a slightly edited version of his editorial (due to space limitations), but I assure you, I left all his good stuff in! From this point on, the words are all Mr. Gusman's:
Will we see an extension of the Terrorism Risk Insurance Act (TRIA) anytime soon? Legislation was introduced in the Senate a few weeks ago by Senators Robert Bennett (R-Utah) and Christopher Dodd (D-Conn.), and a Senate Banking Committee hearing was scheduled for March 3. That hearing has since been postponed.
In the House, meanwhile, legislation was also recently introduced, drawing kind words from the Independent Insurance Agents and Brokers of America.
The American Insurance Association (AIA) also reacted favorably to the action from the House. The association said that the introduction "shows that congressional members want to put significant bipartisan energy into protecting the U.S. economy against catastrophic terrorism."
However, a story that appeared March 3, on the National Underwriter Online News Service, suggested that the White House may not be set to throw its weight behind a TRIA extension. According to the story, Greg Zerzan, acting assistant secretary of the Treasury for Financial Institutions, "stonewalled" questions regarding the White House position on a TRIA extension at an industry seminar.
It's hard to argue against the need for some type of short-term TRIA extension, and the industry is probably getting tired of recycling the same, albeit accurate, comments depicting the necessity of the act every time the topic is broached. And with bipartisan support, it's hard to believe that nothing will eventually get done in this area. The pertinent questions are when will it happen, and what form will it take?
TRIA opponents generally raise two arguments: a backstop is no longer needed; and the federal government needs to be careful that it does not get saddled with covering the insurance industry's back indefinitely.
The first point is highly questionable, but the second has some merit. TRIA has always been meant to be a temporary fix, and at some point the industry is going to have to come forward with a comprehensive plan for dealing with the reality of terrorism. Logic seems to say that a TRIA extension would go through 2007, giving insurers some time to come up with a workable solution. For an industry that is increasingly trying to prove that it does not need federal intervention to function properly, showing that it can address the threat of terrorism effectively would go a long way towards silencing the critics.
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