Brokers Feel TRIA Renewal Question Of National Security

An insurance brokers' group representative told a U.S. Senate panel last week that its members believe that continuing the legislation providing a federal backstop for insurers' terrorism catastrophe losses is a matter of national security.

Speaking on behalf of the Washington, D.C.-based Council of Insurance Agents & Brokers, Don Bailey, chief executive officer of Willis, said renewal of the Terrorism Risk Insurance Act "is not about protecting the balance sheets of insurers and brokers--it is about protecting commercial policyholders and creating and sustaining a national economy that encourages investment and development."

According to the transcript of his comments made before the Senate Banking Committee yesterday, Mr. Bailey said, "This is a matter that far transcends the insurance industry--it is a matter of our national economic security."

He noted that after 9/11, terrorism insurance that was once readily available became almost entirely unavailable--and what was available was "prohibitively expensive."

This, he said, had caused airlines to ground aircraft and construction in high-risk zones to cease. It was not until TRIA was created that the insurance markets stabilized and economic activity could resume with the proper insurance coverage in place, he said.

Mr. Bailey noted that in some places state and local laws require the coverage in addition to lenders.

The private market lacks the capacity to adequately cover potential losses, he said, adding that estimates put available global capacity at $6-to-$8 billion for terror cover, which could be easily overwhelmed by a single $100 billion terrorist attack.

"There is simply not enough capacity in the private market to cover losses due to terrorism," he said.

He noted that acts of terrorism cannot be predicted or modeled, primarily because they are not acts against an individual, but the country.

"The terrorism threats facing our country remain significant and unpredictable," he said. "Allowing TRIA to expire at this time will certainly cripple, if not completely paralyze, a significant portion of our economy."