Insurance company trade groups are butting heads over what provisions should be part of legislation to extend the federal government's reinsurance backstop for high-level terrorism losses, with the potential impact on smaller carriers fueling the dispute.
The disagreement involves the American Insurance Association on one side, against the Property Casualty Insurers Association of America and the National Association of Mutual Insurance Companies on the other.
Among other points of contention, PCI and NAMIC feel 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.
(CIAT, according to its Web site–www.insureagainstterrorism.org–"represents a wide range of businesses and organizations throughout the transportation, real estate, manufacturing, construction, entertainment and retail sectors.")
Part of the agreement between 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 drew 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," said the letter, obtained by National Underwriter.
Another concern is that the agreement between 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."
"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," the letter read.
"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 added.
"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 read.
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," the letter read.
The letter was written 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 last week by the Capital Markets Subcommittee of the House Financial Services Committee on what specific provisions the industry needs in a bill renewing TRIA. (See related story, page 6.)
The letter–addressed to Mark Racicot, president of the AIA–was signed by June Holmes, interim CEO of PCI, and Chuck Chamness, president and CEO of NAMIC.
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