Insurers Need Dirty Bomb Protection, Csiszar Warns

ORLANDO, FLA.--The insurance community must seek continuing federal support for terrorism losses because the industry could not pay the claims from a radioactive blast, the leader of a major insurer group warned.

Ernst Csiszar, president and chief executive officer of the Property Casualty Insurers Association of America (PCI), made his remarks in an interview here before he addressed the National Council on Compensation Insurance Annual Issues Seminar on regulatory and legislative hot spots.

In his opinion, the extended version of the Terrorism Risk Insurance Act--which expires at the end of next year--"in its current form has no chance of renewal."

The PCI leader said the insurance industry "needs to get its act together and find a public-private solution."

One alternative, he said, might be a pool arrangement similar to what has been created in the United Kingdom. Mr. Csiszar also mentioned the use of bonds, and allowing insurers to put up tax-free reserves for terrorism losses.

Those options could be part of a private component, he said, "but you still need a backstop" from the federal government.

Mr. Csiszar cited the damage that was done by the Chernobyl nuclear plant disaster to make his point that insurers could not protect against a radiological threat.

"There's no way the industry can handle this kind of event," he said. The loss from a terrorist dirty bomb that spread radioactivity for miles would be "an insurmountable event."

The discussion of terrorist threats, Mr. Csiszar added, needs to get beyond the possibility of damage created by two 747 jet crashes and look at the possibility of dirty bombs. "Let's get realistic," he said.

Yesterday, the NCCI meeting heard from Jeffrey Bragg, executive director of the U.S. Terrorism Risk Insurance Program (TRIP), the entity created by the U.S. Treasury Department under TRIA to "provide for a transparent system of shared public and private compensation for insured losses resulting from acts of terrorism," according to its Web site. TRIP is the industry's reinsurance backstop in case of another major terrorism attack.

Mr. Bragg advised attendees that in Congress, "more people need to hear your views." He said that TRIP, in the course of developing regulations for TRIA's implementation, has had to go through a 15-step process, which makes the enterprise "like swimming through peanut butter."

He said TRIP has a proposed regulation in the works concerning how to recoup monies it pays to insurers impacted by a terrorism event, to be released in 90-to-120 days.

The renewed TRIA mandated a study of the terrorism insurance market by a presidential working group from the Treasury Department.

Mr. Bragg said Treasury has received comments from 39 groups, but he would not speculate on what their eventual recommendations might be.

In answer to a question, he said he did not believe that the Bush administration had prejudged the issue.