It looks like Congress may actually do something about terrorism insurance. The government insurance program, set to expire at the end of this year, provides reinsurance for property and casualty lines (property, workers comp, auto) when claims are incurred as a result of foreign terrorists. After a high deductible, the government kicks in to pay most of the remainder.
The coverage, known as TRIA for Terrorism Risk Insurance Act, came into being shortly after 9/11 on a temporary basis. The reasoning behind TRIA is simple – no single insurer, nor the industry as a whole, has the financial resources to pay claims for a catastrophic terror event – think nuclear bomb in New York City, or exploding natural gas tanker in Boston.
This is a big deal. Insurance companies specifically exclude terror coverage whenever they can; property insurance is one that is particularly vulnerable to concerns about attacks. A group of 28 governors has joined together to pressure their Congressional delegations as well as the Bush administration for extension of TRIA.
For over a year, insurers had hard to get coverage extended, to no avail. The Bush administration wanted the industry to pay very high deductibles, so high that many industry experts viewed the “insurance” as little more than picking up the pieces after the industry was bankrupt. Now, news has come out that a compromise is under serious discussion in the House Financial Services Committee.
According to Insurance Journal;
“The extension proposal creates so-called “silos” for major coverage areas of workers compensation, property, casualty and NBCR (coverage for nuclear, biological, chemical and radiological attacks), with each silo being assigned its own deductible. The measure excludes commercial auto, which is now covered under TRIA, while proposing to add group life. Insurers would be required to offer NBCR coverage.
Federal intervention would be triggered only if losses exceed $50 million in 2006 and $100 million in 2007.
In the new plan, the distinction between foreign and purely domestic acts of terrorism would be removed so that domestic terrorism would be covered.
The co-share paid by insurers, which is now at 10% for all triggered events, would increase for smaller events and decrease for so-called mega events, with a 20% co-share for the first $10 billion down to 5% for events more than $40 billion.
Insurers would pay back any federal monies through policyholder premium surcharges that would be capped at 3%.”
Sounds workable, but there is one major problem; the term of the new TRIA is two years, so we could very well find ourselves back at this in a year, worried about the potential implications of a soon-to-expire law.
The good news is Congress may actually get something done; the bad news is they seem to have forgotten the old saw “if you don’t have time to do something right the first time, what makes you think you’ll have time to fix it”
Nov
13
