Loss Of TRIA Means Chaos For Industry: Marsh

The end of the Terrorism Risk Insurance Act (TRIA) could spell chaos for the property-casualty insurance industry since insufficient capacity exists to cover the exposures, an executive with Marsh said yesterday.

Robert Blumber, managing director and leader of Marsh Inc.'s Terrorism Risk Practice, made his comments during a teleconference sponsored by his brokerage on "Mitigating the Business Risks of Global Terrorism."

"Assuming there is not another 9/11 type attack in the United States over the next 21 months, the consensus opinion appears to be that a second extension of TRIA in 2007 is highly unlikely," said Mr. Blumber.

"If TRIA expires, it's not a very pretty picture for sure," he said, and detailed the following scenario.

There will be considerable property market dislocation; the current captive insurance unit approach to dealing with terrorism risk will no longer be viable; reliance on the stand-alone market will increase significantly and it will ultimately not have sufficient capacity to meet client demand; and the creation of terrorism market solutions will be hampered.

Mr. Blumber advocated that clients take a very active role in the debate to support the extension of TRIA. His comments came as industry witnesses in New York painted a similar picture at a hearing of the National Association of Insurance Commissioners.

"It is critical for businesses, as employers of thousands of people and supporters of our nation's infrastructure and economy, to speak out and be heard on this subject," he said.

The possible demise of TRIA comes at a time when the national take-up rate, or purchase of policies, is increasing--especially among real estate, hospitality and financial institutions--standing at more than 70 percent nationally, he observed.

While there is some increase in writing in the stand-alone market to take up the increased exposure limits captives are experiencing under the current TRIA provisions, captive participants need to begin planning for a world without the backstop, Mr. Blumber said. He noted that captives have been the only viable option for risks to place exposures for nuclear, biological, chemical and radiological risks.

One major message coming out of the discussion was that those who seek to do business overseas need to plan ahead and do as much research as possible on the clients with whom they plan to do business.

South America and the Middle East are areas of opportunity for businessmen, said executives. But visitors need to know their surroundings and be aware of the foreign culture to avoid insulting someone with a gesture with unintended meaning.

Drew Watson, vice president with Kroll Security Group-North America, noted that the biggest threats to visitors overseas remain health, hygiene and petty crimes. He said visitors should check Web sites at the U.S. Department of State and the Centers for Disease Control for information on the country they plan to visit.

"Don't be a victim," he warned.

Mr. Watson said Kroll offers a training program on techniques to handle emergencies and to deal with threats. Depending on where the individual is visiting, and the amount of training required, training classes for one or a number of pupils can range from $4,500 to $45,000.