NU Online News Service, Aug. 3, 3:14 p.m. EDT
The private insurance market cannot solely bear the risk associated with terrorism, making the need for a terrorism backstop like that provided by the Terrorism Risk Insurance Act (TRIA) essential, the insurance industry said.
Industry groups have submitted responses to questions posed by the President's Working Group (PWG) on Financial Markets as it considers the availability and affordability of terrorism insurance.
"Large-scale terrorism is fundamentally uninsurable in a purely private market context," said a letter to the PWG from the National Association of Mutual Insurance Companies (NAMIC).
"A public-private partnership limiting maximum exposure of insurers is essential," the association's letter continued.
According to a letter submitted by J. Stephen Zielezienski, senior vice president and general counsel of the American Insurance Association (AIA), "most experts do not believe that the elements necessary for the private insurance market alone to assume this risk currently exist or are likely to be present as long as the terrorist threat remains highly volatile."
The federal law is scheduled to expire at the end of 2014.
"If there were another act of catastrophic terrorism on the U.S., TRIA would provide the necessary government support so that market availability the day after the attack would be similar to availability the day prior to the attack," Mr. Zielezienski said. "Absent TRIA, insurers and their consumers would face the same uncertainties that existed immediately [after 9/11]–market circumstances that led directly to the creation of the federal program."
The Institute for Business & Home Safety (IBHS) wrote that it would like to say the affordability and availability lies in mitigation efforts, but that is not the case.
"Terrorism presents unique, multifaceted challenges," said the IBHS letter submitted by Debra Ballen, general counsel and senior vice president of public policy. 'These challenges underscore the need for an ongoing, high-threshold federal terrorism backstop."
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