As the Boston Marathon bombings show, the war on terror is far from over, but the Terrorism Risk Insurance Act is a "proven and unqualified success," the president of the Insurance Information Institute told a Senate committee today.
Robert P. Hartwig, III president and chief economist also said that TRIA has not only succeeded in restoring stability to the country's vital insurance and reinsurance markets in the years immediately following 9/11, "but it continues more than a decade later to deliver substantive, direct benefits to millions of businesses, workers, consumers and the overall economy — all at essentially no cost to taxpayers."
Hartwig's testimony before the Senate Banking Committee continues a push for the act's renewal and reiterates testimony from a hearing on the issue held last Thursday by the House Financial Services Committee.
Hartwig warned, "Failure to institutionalize a permanent plan to protect the nation's financial infrastructure leaves the country unnecessarily vulnerable to economic instability and risk of recession."
The current authorization does not expire until Dec. 31, 2014, but insurance contracts are annual deals, and renewal efforts for policies going into 2015 now underway.
Peter J. Beshar, executive vice president and general counsel of Marsh & McLennan, New York, testified at both hearings that doubts about TRIA's renewal "are already affecting the primary insurance market, particularly on the workers' compensation line of business."
Erwann O. Michel-Kerjan, professor and managing director, Center for Risk Management and Decision Processes at the University of Pennsylvania's Wharton School, also testified.
In his testimony, Hartwig said that upwards of 60 percent of businesses purchased terrorism coverage nationally in 2012, up from 27 percent in 2003, the first full year of the program.
Moreover, he noted, industries responsible for much of the country's critical infrastructure such as power and utilities, telecommunications and health care, along with financial institutions and local government have take-up rates that approach or exceed 70 percent.
And, Hartwig said, the take-up rate for workers compensation is effectively 100 percent, meaning that every worker in America is protected against injuries suffered as the result of a terrorist attack.
"The unambiguous success of TRIA demonstrates that the act has become an invaluable component of the country's national security infrastructure," Hartwig said.
He said the continued operation of the nation's financial institutions—including its insurers—during and throughout the aftermath of a major terrorist attack—is absolutely essential to ensure a smooth and expedited recovery from the massive economic and operational shocks of the sort that occurred after the 9/11 attacks and that are certain to accompany future such events, irrespective of where in the country they occur.
In one industry statement released in connection with the hearing, Leigh Ann Pusey, president and CEO of the American Insurance Association, pointed out that "TRIA protects more than just policyholders, it protects taxpayers too."
She said that, in its 11 years of existence, TRIA hasn't paid out one penny. "It requires insurers to meet significant deductibles and retentions, and includes a mandatory recoupment mechanism for any federal dollars expended on the first $27.5 billion in losses."
The National Association of Mutual Insurance Companies pointed out the loss management plan created under TRIA "remains a vital part of our national economic security," and urged Congress "to act swiftly to reauthorize the program."
Jimi Grande, senior vice president of federal and political affairs for NAMIC, said the marketplace for terrorism coverage as it exists today is due entirely to the existence of TRIA.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.