Fort Lauderdale, Fla.–State legislators here started planning for a marketplace without a federal terrorism insurance backstop by asking the nation's regulators to craft a solution without help from Washington.
Lawmakers at the National Conference of Insurance Legislators spring meeting heard pessimistic outlooks on the federal government's willingness to participate in a permanent solution for terrorism insurance once the Terrorism Risk Insurance Extension Act expires in 2007.
The group proved quite receptive to suggestions from both industry and Consumer Federation of America Insurance Director J. Robert Hunter, a TRIA critic, that NCOIL and the National Association of Insurance Commissioners join forces to deal with terrorism risk insurance.
Proponents of the notion argued this would demonstrate to Congress that it need not act to substitute federal control for state insurance regulation.
In Washington, a Presidential Working Group on Financial Markets is expected to issue a report at the end of September on terror risk issues. "The chances are they won't come up with anything favorable, but this year that is the vehicle we have to work with," said Mike McCarter, an American International Group actuary who represented the American Academy of Actuaries–which is doing its own analysis of terrorism exposure–at the session.
In advance of that action the plans to prepare a series of reports aimed at developing an attitude favorable to the insurance industry in the study group.
Eric Nordman, NAIC director of research, said he thought the commissioners would prove receptive to joining with legislators in coming up with some sort of state solution, if one is possible. "I think that it is very important that in the next six months we start to look at the post-TRIA era," he said.
Paul Donohue, NCOIL's Washington representative, said that in discussions with a top staff member of the House Financial Services Committee, Robert Gordon, he got the impression that the reactivated Working Group will not accomplish much in terms of a permanent solution.
"As for state legislators, he suggested that they might try and come up with their own mini-TRIAs," he said.
Also on the agenda will be an NAIC-originated proposal to create state and federal backstops to cover mega-catastrophe risks that will also face regulatory scrutiny at the NAIC meeting this week in Orlando.
While crafting their proposal, regulators specifically excluded the terror risk segment in the belief that TRIA had dealt with it.
Mr. Gordon was quoted as saying he was concerned by the attitude of some insurance industry representatives in the capital that since the current extension still has 22 months left there was no sense of urgency.
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