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To the editor: Business Insurance's June 25 editorial on legislation to extend the Terrorism Risk Insurance Act, "TRIA Extension Bill Good, Can Get Better," was right on target. TRIA played a key role in triggering the economic recovery in the wake of the 9/11 attacks because it created a market for an uninsurable risk and allows businesses of all sizes in all parts of the country to protect themselves from the financial devastation of a terrorist attack. The program deserves a long-term extension.
However, as you correctly point out, the inclusion of a mandatory "make available" provision for weapons of mass destruction oversimplifies an extraordinarily complex issue. Some--but certainly not all--commercial policyholders have expressed a demand for coverage against attacks that employ nuclear, biological, chemical or radiological weapons. It is naïve, however, to think that this demand can be met simply by requiring insurers to offer the coverage.
The reality is that many small and midsize insurers will be unable to provide this coverage without jeopardizing their solvency. A "make available" requirement for NBCR coverage would reduce availability for traditional terrorism coverage, increase consumer costs and could force these companies to abandon the terrorism insurance market altogether. The potential for such unintended consequences is why the NBCR issue requires careful study before attempting to address it in the form of a mandate to the private sector. Adding a "make available" requirement for NBCR coverage could threaten the well-functioning program, the expansion of the private market and the expeditious extension of TRIA. American businesses, insurers and taxpayers would be better served by a full study of the critical issues involved in NBCR losses.
The complicating factor in this debate is the fact that NBCR coverage is included today under all workers compensation policies. This ensures that workers who are injured or killed in a terrorist attack while on the job will get the protection intended by the workers compensation system. However, the sheer size of an NBCR attack threatens the solvency of the workers compensation system and imperils the very system workers and their families are counting on.
We hope the commercial risk managers who read and respect Business Insurance's opinion will join PCI and NAMIC members in urging Congress to support a proposal that would create an NBCR Study Commission to develop a comprehensive national approach to the issue of NBCR exposure within the next 18 months. By focusing the debate on effective ways to address workers compensation coverage and more thoroughly studying how the very serious long-term NBCR risk should be addressed, Congress will be able to enact a long-term extension of TRIA before consumers face the uncertainty of renewing policies that extend into 2008 without terrorism coverage in place.
National Assn. of Mutual Insurance Cos.
Interim Chief Executive Officer
Property Casualty Insurers Assn. of America
Des Plaines, Ill.