Terrorism risk insurance: necessary or not?
May 12, 2014
The Terrorism Risk Insurance Act is scheduled to expire in December 2014, but debate in Congress may keep it from being renewed.
Failure to renew or replace the Terrorism Risk Insurance Act (TRIA) could push employers to pay higher comp premiums, potentially causing a slight reduction in overall economic growth, according to a study released last week by RAND Corp.
The National Journal LIVE also hosted a policy summit and discussion recently on the Terrorism Risk Insurance Act at Chicago’s Soldier Field. The act is scheduled to expire in December, causing big debate in Congress on whether to reinstate it or not.
The argument: Some like the bill for lowering premium costs and increasing terrorism risk coverage, while others say it places undue financial pressure on tax payers.
National Journal LIVE’s General Manager Johanna Derlega began the story from the top.
“The terrorist attacks of September 11, 2001 inflicted enormous loss on the American economy. And it was one of the most costly disasters to American insurance,” she said. “Because of that, many insurers stopped providing terrorism risk coverage.”
She’s right. These attacks resulted in $32 billion in insurance claims, and were the second most costly insurance event in U.S. history only after Hurricane Katrina, which was first. See the whole list here.
Because of these financial disruptions, the government enacted the Terrorism Risk Insurance Act (TRIA), a public/private cost-sharing program that requires private insurance companies to provide terrorism risk coverage in exchange for federal financial backing.
Side 1: Pro TRIA
“It is so important that we all come together to forge a consensus on TRIA that balances the responsibilities of private industry and the government and promotes economic growth while maximizing tax payer protection,” said Congressman Randy Hultgren (IL-14). “This summit is a vital component to getting that process started and hopefully completed as soon as possible.”
Zurich was also in attendance to voice opinions on how this act would affect insurance companies and their clients.
“From Zurich’s perspective, our efforts to help promote the passage of TRIA are industry and economically based,” said Sean Kevelighan, SVP, Head of Government and Industry Affairs. “Right now there is a lot of uncertainty. And as much as Zurich’s technical underwriting skills, combined with our ability to spread risk around the world, creates certainty for our customers, the fact is that if something were to happen, many other insurers could be at risk in terms of solvency without a government backstop. Therefore, it’s critical to make sure all insurers as well as insureds are prepared so that the market and economy can withstand a major terrorist strike.”
Mike Foley, Zurich’s CEO, agrees. “This is such an important topic for our industry around the certainty and stability of our economy,” he said.