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TRIA's future likely 'down to the wire again'

Posted On: Oct. 29, 2006 12:00 AM CST

NEW YORK—The federal government is unlikely to take any action on a possible extension of the federal terrorism insurance backstop until December 2007, so risk managers will again have to secure terrorism coverage in an uncertain insurance market, brokers say.

Members of Congress have many competing priorities and will be unable to devote their attention to another extension of the Terrorism Risk Insurance Act until the extended law expires in December of next year, several brokers said during a panel discussion last week on the state of the terrorism insurance market and the future of TRIA, sponsored by the Assn. of Professional Insurance Women Inc. in New York.

"It's going to come down to the wire again in 2007," said Robert Blumber, managing director and manager of Marsh Inc.'s terrorism specialty group in New York.

James Dover, director, special risks/counter terrorism for Aon Crisis Management in New York, said there is a 50-50 chance that Congress will eventually pass another TRIA extension.

A long-term solution with a minimum 10-year guarantee would be ideal so that buyers do not have to deal with an uncertain situation every two years, Mr. Dover said. In the absence of a long-term solution, the conditional exclusions included by carriers in policies during last year's renewal period will come back into play, he noted.

Amid the uncertainty over whether TRIA will be extended again, buyers have to take the time to understand which insurers in their programs are willing to take on terrorism risk and incorporate stand-alone capacity when possible, Mr. Blumber said. A key question, though, is how the stand-alone market would respond to an expiration of TRIA and whether stand-alone capacity becomes so scarce that it drives up the price, he said.

Ronald Robinson, chair of the Chicago-based Defense Research Institute's TRIA subcommittee and a partner in the Los Angeles law firm of Berkes Crane Robinson & Seal L.L.P., served as moderator of the panel discussion.