Groups weigh in on terror backstop

WASHINGTON--A policyholder organization and an insurer trade group have released a set of "common principles" they say must be addressed as Congress considers extending the federal terrorism insurance backstop.

Monday's announcement by the Coalition to Insure Against Terrorism and the American Insurance Assn. came on the eve of a hearing by a subcommittee of the House Financial Services Committee on the program, which is slated to expire Dec. 31. The CIAT/AIA document calls for creation of a program that has no expiration date and would end "only when Congress determines terrorism is no longer a threat."

The proposal calls for a two-part backstop. The first part would maintain the current backstop structure for conventional terrorism risks. Nuclear, biological, chemical and radiological risks, however, would be treated differently by "lowering or eliminating insurer deductible and eliminating the insurer copayment for NBCR to reflect" the consistent view of the Government Accountability Office, the Department of the Treasury and the President's Working Group on Capital Markets that markets are not working in this particular area of risk, and to state "clearly and affirmatively" that the federal government is "solely liable for NBCR terrorism losses above insurers' individual NBCR retentions, thus encouraging insurers to provide more capacity."

In addition, the CIAT/AIA proposal calls for eliminating the current distinction between foreign vs. domestic acts of terrorism. Under current law, the backstop would respond to terrorist acts of foreign origin, but it would not cover those deemed to have been committed by a domestic source.