WASHINGTON–Lawmakers are expressing an interest in a long-term solution to the problem of insuring against terrorism risk, making their concerns known through letters to the Treasury and by scheduling a joint committee hearing.
The Treasury Department houses The President's Working Group on Financial Markets, which has been charged with producing a report on the terrorism insurance market by September.
Several members of the House, including Reps. Sue Kelly, R-N.Y., Spencer Bachus, R-Ala., Rob Simmons, R-Conn., Pete Sessions, R-Texas., and Richard Baker, R-La., have written to the Treasury to express concerns over such areas as the availability of reinsurance and nuclear, chemical, biological and radiological attack coverage (NCBR), and the role of the federal government in ensuring that coverage is available and affordable.
Additionally, Reps. Kelly and Simmons plan to hold a joint hearing of the House Financial Services Subcommittee on Oversight and the Homeland Security Subcommittee on Intelligence, Information Sharing and Terrorism Risk Assessment, which they chair, respectively.
The hearing will focus on the difficulties of adequately evaluating terrorism risk and whether the private sector could ever develop a long-term system for insuring against terrorism given these problems.
"Terrorism, by its very nature, is different from other risks faced by the insurance industry," Reps. Kelly and Simmons wrote. "In contrast with natural disasters, terrorism is deliberately perpetrated by humans and is extraordinarily difficult to predict. As a result, the frequency of terrorist attacks defies risk modeling, and efforts at loss mitigation can be countered by loss maximizing measures by attackers."
The two also noted that the terrorism information is especially difficult for insurers to gather, owing to the sensitive nature of any incidents that do not actually occur.
"Additionally, and equally important, because of the classified nature of most threat information, insurers cannot properly evaluate the many complex risks associated with terrorism," they wrote. "Insurers and most policyholders do not have access to specific threat information, making the job of calculating the risk of a terrorist attack exceedingly difficult, if not impossible."
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