Insurer Groups Clash Over TRIA Renewal Provisions

WASHINGTON–Trade groups representing mostly smaller insurers have split over what provisions should be part of legislation to extend government supports for insurers' high-level terrorism losses.

The disagreements involve the American Insurance Association on one side and paired against it the Property Casualty Insurers Association of America (PCI) and National Association of Mutual Insurance Companies on the other.

Among other things PCI and NAMIC feel the AIA jumped the gun in announcing an agreement with the Coalition to Insure Against Terrorism over a proposed provision for an extension of the Terrorism Risk Insurance Act.

Part of the agreement between the AIA and the Coalition would require all property insurers to sell insurance for such attacks, with the federal government stepping in to cover losses only above a certain amount.

The AIA/CIAT deal on retentions also draws criticism, because “lowering insurer retentions below the current 20 percent is very important to the medium-sized and smaller insurers,” a letter written to AIA by PCI and NAMIC said.

“The document appears to accept the 20 percent level as a permanent feature of the program without considering the consumer benefits of lower retentions,” the letter said.

Another concern is that the agreement between the AIA and CIAT concedes a trigger for federal aid in the event of a terrorism attack “no higher than the current $100 million, with possible special provision for small insurers.”

The letter from PCI and NAMIC to AIA obtained by National Underwriter said, “Throughout the industry discussions over the past year and in virtually all our public statements about this issue, our organizations have been very explicit about our support for reducing the future program trigger to at least $50 million, or even lower.

“This is a vital issue for medium and smaller insurers who, collectively, make up over 90 percent of the TRIA-writing companies in the industry,” the letter said.

“We cannot support, and urge AIA not to support, a statement of principles that could be interpreted to imply that a $100 million trigger is appropriate,” the letter said.

It added that the groups “do not believe that a core concern of our members should be treated as a 'possible special provision.'”

“Finally, we are concerned that including such a reference will be seen by those who oppose the terrorism insurance program entirely as an 'opening bid' in negotiations and may result in an even higher trigger ultimately,” it said.

The letter was written yesterday, apparently just hours after AIA and CIAT announced their support for a common approach on provisions to be contained in legislation renewing TRIA, which expires Dec. 31.

The agreement was signed against the background of a hearing being held today by the Capital Markets Subcommittee of the House Financial Services Committee on what specific provisions the industry needs in a bill renewing TRIA.

The letter to Mark Racicot, president of the AIA, was signed by June Holmes, interim CEO of PCI, and Chuck Chamness, president and CEO of NAMIC.