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Insurer advocates defend TRIA, express hopes for extension

Terrorism backstop

BOSTON — The Terrorism Risk Insurance Act is part of the fabric of keeping the insurance market stable in case of a terrorist attack and is far from a “corporate welfare” program, as some observers have previously contended, according to speakers at the American Property Casualty Insurance Association annual meeting in Boston on Tuesday.

“It was a very scary time” just after the Sept. 11, 2001, terrorist attacks on the U.S., said Robert Gordon, senior vice president of policy, research and international with the Chicago-based American Property Casualty Insurance Association.

The original TRIA program, Mr. Gordon said, “had two specific goals: to immediately stabilize the marketplace and make insurance available after 9/11, and to insure the marketplace will remain stable after another event occurs.”

“The way we lobbied it, the way it was positioned, we were confronting an existential threat,” said Jason Schupp, Frederick, Maryland-based head of regulatory affairs for Zurich Insurance Group Ltd.

The initial framework for TRIA, Mr. Gordon said, was put together in three weeks, “and we got it through the House in six weeks.” The Senate, he said, “then took another year to get it done, which underscores why it’s so important to have a program in place in advance.”

The TRIA program has been renewed with various amendments since it was signed into law in 2002, although various amendments have increased the industry co-share of losses and insurer deductibles, among other things. The current iteration of the law is set to expire at the end of 2020. Last week a bill was introduced in the U.S. House of Representative to reauthorize the backstop for 10 more years.

“The industry and the policyholder community are united in wanting a clean, straight reauthorization without change for seven to 10 years,” said Charles Landgraf, Washington-based co-head of the legislative and public policy group at Arnold & Porter Kaye Scholer LLP. “We’re almost afraid to risk having the mechanism lapse again as it did in the beginning of 2015 for 12 days.”

“We’re cautiously optimistic, at least on the House side, that there is an emerging consensus to do a straight reauthorization before the last minute,” Mr. Landgraf said, adding that at a recent breakfast with House Speaker Nancy Pelosi, she said it “was important to renew TRIA early.”

But the original program has been weakened by the various amendments during the program’s various renewals, Mr. Gordon said.

With the changes to industry retention levels that require greater participation by insurers, “the program no longer provides adequate incentive to maintain market stability” in the wake of another event, Mr. Gordon said, adding that a survey of his organization’s members showed nearly three-fourths would exclude terrorism coverage where allowed.

As to consumer advocate charges that the TRIA program constitutes “corporate welfare,” Mr. Schupp said “it’s not free to insurance companies, it’s free to policyholders.”

“TRIA has no cost to the government,” according to the Congressional Budget Office, he said.

Further, “You’re using the industry to deliver the relief,” said Scott Sinder, Washington-based chair of the government affairs and public policy group for Steptoe & Johnson LLP.

“By having the program, you get to harness the infrastructure of our industry to adjust claims and deliver relief,” he said.

The panel was moderated by Business Insurance editor Gavin Souter.




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