Hartwig Says Sept. 11 Losses Show Need For TRIA Extension

Six years after the Sept. 11 terrorist attacks, it is vital that a long-term government terrorism risk insurance program be passed, according to the president of the Insurance Information Institute, Robert P. Hartwig.

“With many realistic attack scenarios producing losses several times that of Sept. 11, it is essential that a long-term terrorism risk insurance program be enacted,” Mr. Hartwig said in a statement.

“Implementation of such a measure is a key component of the nation's effort to protect the financial homeland,” he added. “Congress is considering an extension [of the current terrorism reinsurance fund] which will protect millions of businesses and their workers. It also addresses the potential ambiguity of domestic versus international terrorism acts.”

The Terrorism Risk Insurance Revision and Extension Act of 2007–which would continue the federal reinsurance backstop for private carriers for as much as 15 years–is up for debate in both the House and Senate. The program expires Dec. 31.

Long-term benefits of an extension, according to Mr. Hartwig, will be felt immediately and affect virtually every segment of the economy.

“Businesses in cities and towns, large and small, from coast to coast would under this proposal be able to purchase terrorism risk insurance more readily, secure in the knowledge that the protection will remain available for many years to come,” he said.

“It should be particularly beneficial to the construction, commercial real estate, manufacturing, and utility and transportation industries,” he added. “Governments that own and operate critical infrastructure such as airports, ports and bridges will also benefit.”

However, he expressed concern over the inclusion of a provision that would compel insurers to cover nuclear, biological, chemical and radiological risks.

“NBCR risks pose unique threats which have in the past not been covered by standard property-casualty insurance policies,” he warned. “Insurers have little-to-no experience insuring against these risks–the magnitude of which can easily exceed the claims-paying resources of private insurers, even with TRIA in place.”

The threat of another attack remains a source of uncertainty for the U.S. economy, with potentially negative consequences for both business interests and employment, according to Mr. Hartwig.

“Besides killing almost 3,000 individuals [on 9/11], the terrorists also sent economic shock waves throughout the U.S. economy,” he noted.

“By paying Sept. 11-related claims totaling $31.6 billion, the insurance industry helped families and businesses get back on their feet after an event without precedent in U.S. history,” he said, noting that adjusted for inflation, insurers paid the equivalent of $35.9 billion in claims in 2006 dollars ($37 billion in today's dollars).

Some consumer advocates disagree, however, on the need for TRIA, arguing that it could be doing more harm than good.

“There is no justification for increasing taxpayer risk when terrorism insurance is widely available at rates that are dropping and the financial capacity of the insurance industry to handle terror losses is unprecedented,” according to Travis Plunkett, legislative director of the Consumer Federation of America.

“By expanding TRIA instead of further cutting it back, H.R. 2761 would foolishly choke off the vigorous growth in the private terror insurance market and reduce the incentive of insurance buyers to take reasonable steps to reduce their terror losses,” he said.

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