You are here:HomeIssuesTerrorism Insurance2004Insurers Ask the Treasury to Back Extension of TRIA

Insurers Ask the Treasury to Back Extension of TRIA

WASHINGTON, D.C., June 3, 2004 - The Treasury Department should immediately urge Congress to extend the Terrorism Risk Insurance Act (TRIA) for at...
June 3, 2004

Groups Cite Economic Stability From Program

WASHINGTON, D.C., June 3, 2004 - The Treasury Department should immediately urge Congress to extend the Terrorism Risk Insurance Act (TRIA) for at least two years beyond its Dec. 31, 2005 expiration, a wide range of insurance industry groups said in written comments to the Treasury Department.

The Treasury Department has been seeking comments as part of its decision-making process on whether to extend a soon-to-expire requirement that insurers "make available" insurance for TRIA terrorism risk in their policies under the same terms and conditions as they provide insurance for other types of losses. If Treasury does not extend the "make available" provision of TRIA, the provision will expire at the end of this year.

The insurance groups noted in their comments that Treasury's "'make available' extension determination highlights the market disruption that will be caused by Congress' failure to extend TRIA." The groups urged Treasury to urge Congress to extend TRIA this year. Failure to do that will create uncertainty and potential market upheaval for both commercial policyholders and insurers this fall. In September, insurers and their customers will begin the process of negotiating new and renewal policies that become effective after January 1, 2005. The policy period for these insurance policies will run beyond the hard sunset date of TRIA; as a result, these policies will remain in effect after TRIA expires and insurers and their customers will no longer have the protections of the federal backstop. Without the backstop, insurers will be hard-pressed to continue the level of terrorism insurance protection TRIA was designed to encourage.

"Insurance is a key element of national economic security, and a catastrophic terrorist attack remains uninsurable. If Congress fails to extend TRIA this year, we will return to the same kind of marketplace uncertainty and instability that prompted the law's creation in the first place," said J. Stephen Zielezienski, vice president and associate general counsel for the American Insurance Association (AIA), who submitted the comments on Wednesday to the Treasury Department on behalf of AIA and the other insurance trade groups.

"TRIA has provided a measure of stability and certainty in an otherwise unstable, uncertain environment, and those benefits should be continued while a long-term mechanism for dealing with terrorism risk is developed," the insurance groups said in their formal comments.

The comments went to Treasury on behalf of the AIA, the Council of Insurance Agents and Brokers, the Independent Insurance Agents and Brokers of America, the National Association of Professional Insurance Agents, the Property Casualty Insurers Association of America, the Reinsurance Association of America, the Surety Association of America, the National Association of Mutual Insurance companies, American Association of State Compensation Insurance Funds and the Financial Services Roundtable.

These groups further urged Treasury to make its decision about the "make available" provision soon. But the groups emphasized that extension of the "make available" requirement alone will not provide the market certainty the US economy requires. Unless TRIA is extended and a more permanent public sector/private sector solution to terrorism risk management is developed, marketplace uncertainty will increase.

An extension would give Congress, Treasury, other government agencies, the insurance industry and policyholders the time to gather market information, analyze it and then debate, develop and implement a long-term solution for managing and spreading terrorism risk, the insurance groups say.

TRIA created a temporary public-private risk sharing mechanism that has enabled the commercial insurance marketplace to function even though the very real threat of further catastrophic terrorism remains. The market was in turmoil following the September 11, 2001, attack when it became apparent that terrorism had evolved into a risk very similar to war - a peril that property-casualty insurers have never covered (with the exception of workers' compensation, which allows no exclusions).

This press release was issued jointly by a coalition of insurance industry organizations that feel the Terrorism Risk Insurance Act must be extended.