Insurers, agents and risk managers were relieved to hear that terrorism coverage won't be impossible to find or afford for the next seven years, thanks to the vote in Congress last week to extend the federal government's reinsurance program, saying it will provide critical certainty to the commercial insurance market.
At the same time, smaller insurers were grateful for what Congress didn't do with its extension of the Terrorism Risk Insurance Act–that is, expand the program to cover nuclear, biological, chemical and radiological risks, as the original House version sought to do.
The Council of Insurance Agents and Brokers looked to assuage the bitterness of key House Democrats, who voiced anger during last week's floor debate on TRIA extension over the fact that the Senate's more restrictive bill–supported by President George W. Bush–was presented on a take-it-or-leave-it basis.
"Notwithstanding the well-intentioned concerns of those who supported a broader bill, we regard today's developments as a tremendous victory for policyholders and the industry," said Joel Wood, CIAB's senior vice president for government affairs, in a note to members.
"The extension for seven years will provide much-needed certainty for developers that terrorism coverage will be available and affordable well into the future," he wrote.
Mr. Wood noted that "had the House not earlier approved a more expansive version of the legislation, it is highly unlikely that such a result would have been plausible."
Reaction within the commercial insurance community was uniformly positive, as all sides breathed a sigh of relief that the federal terrorism backstop would not be allowed to expire on Dec. 31.
Marc Racicot, president of the American Insurance Association, said "reauthorization of this program is essential to our nation's economic vitality. AIA looks forward to the next step–the president's signature on this legislation."
David A. Sampson, president and chief executive officer of the Property Casualty Insurers of America, said the final bill "represents significant improvements over what many informed observers expected just weeks or months ago."
On the NBCR issue, PCI made the case that this provision would have likely had a negative effect on the overall program, he said. "We are pleased that members of Congress understand that attacks using weapons of mass destruction are uninsurable," Mr. Sampson said.
"PCI members felt that it would be an onerous and risky burden for both insurers–particularly small-to-midsized companies–and policyholders to expand the program to require companies to offer NBCR coverage," Sampson said. "We are very pleased that we succeeded in having this provision removed from the final bill."
Charles Chamness, president and CEO of the National Association of Mutual Insurance Companies, noted that "by resisting the temptation to increase deductibles, co-payments and the trigger level from their current rates, Congress has ensured the continued participation of many medium- and smaller-sized insurance companies."
Mr. Chamness added that "we are also pleased the legislation applies to both domestic and foreign terrorism attacks, and places an annual cap on insurers' liability." He explained that "increasing insurers' liability could have forced many insurers to withdraw from the market, as their exposure relative to premiums earned on terrorism coverage would have been too great."
Robert Rusbuldt, CEO of the Independent Insurance Agents and Brokers of America, added that the "legislation is crucial to maintaining affordable and available terrorism coverage, and brings certainty to policyholders, insurers and the insurance market as a whole."
Frank Nutter, president of the Reinsurance Association of America, said the new program "will work well to fill the vacuum in reinsurance capacity for acts of terrorism, will keep premiums paid by policyholders at affordable levels, will provide insurance coverage to support economic activity, and will minimize the need for public disaster assistance should there be future terrorist acts in the U.S."
Martin DePoy, steering committee coordinator for the Coalition to Insure Against Terrorism–a policyholder group–said that without the bill, "a great many policyholders across a broad range of industries would have found themselves uninsured against the risk of terrorist attack."
Kathryn Wylde, president and CEO of the Partnership for New York City, said it was "critical" for businesses in New York and other urban centers to have access to coverage to finance development and stimulate economic growth. She said New York shoulders half the insured risk in the country.
Janice Ochenkowski, president of the Risk and Insurance Management Society, said RIMS is "elated that members of Congress united and recognized the importance of the TRIA program."
"The vote to extend TRIA for seven years is critical to U.S. businesses and our economy," added Ms. Ochenkowski, who is also managing director of Jones Lang LaSalle Inc. "TRIA plays a key role in ensuring that businesses have available and affordable options to protect themselves."
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