Treasury Asks Insurer Input On Terror Market

Washington–The Treasury Department is asking for industry input on a study of the long-term availability and affordability of terrorism risk insurance.

An arm of the agency is starting work on a report on the issue it must send to Congress by Sept. 30. An industry official took the request for comments as a positive.

“We're glad to see the President's Working Group on Financial Markets taking action on this vitally important study,” said Dennis Kelly, a spokesman with the American Insurance Association. “AIA will be active participants in this study process.”

However, Emil Henry Jr., assistant secretary for financial institutions, said at an industry event today that insurers should prepare “for the inevitable disappearance of the Terrorism Risk Insurance Act,” which expires Dec. 31, 2007.”

Mr. Henry's comments clearly implied that despite the mandate to file the report, the administration wants to be done with the program as soon as possible.

He said TRIA was designed to meet the dislocation caused by the Sept. 11, 2001 terror attacks, and that even President Bush wanted TRIA to be only a temporary solution to help the market adjust.

In his comments, Mr. Henry cited statistics indicating that the markets have indeed adjusted to the dislocations caused by the 9/11 attack.

The Treasury Department's notice, which is scheduled for publication soon in the Federal Register, establishes a 45-day industry comment period.

The legislation mandates that the President's Working Group on Financial Markets write the report. The panel is comprised of the secretary of the Treasury, the chairman of the Federal Reserve Board, the chairman of the Securities and Exchange Commission, and the chairman of the Commodity Futures Trading Commission. The secretary of the Treasury chairs thepanel.

In his comments at an Insurance Summit conference held in Washington today, Mr. Henry urged those attending to comment. “Time is short,” he said. “The process will be transparent, and we are going to meet the consultation deadline.”

The study mandate requires the President's Working Group, in consultation with the National Association of Insurance Commissioners, representatives of the insurance industry, securities industry, and representatives of policyholders, to perform an analysis regarding the long-term “availability and affordability of insurance for terrorism risk, including group life coverage and coverage for chemical, nuclear, biological and radiological events.”