GREENSPAN’S COMMENTS SHOW CLEAR NEED FOR TRIA RENEWAL
Evidence lacking of private-sector reinsurance market for catastrophic terrorist attacks
WASHINGTON, D.C., Feb. 17— After Federal Reserve Chairman Alan Greenspan said today that catastrophic terrorist attacks remain virtually uninsurable in the private sector, the Independent Insurance Agents & Brokers of America (the Big “I”) renewed its call for extension of the Terrorism Risk Insurance Act (TRIA).
Chairman Greenspan, in comments before the House Committee on Financial Services, noted that there is not conclusive evidence of a private-sector market for insuring catastrophic damages without TRIA and that the marketplace has yet to develop.
“Chairman Greenspan’s comments reflect what we have been saying all along, that terrorist attacks of this nature remain uninsurable and the private marketplace has not developed,” says Charles E. Symington Jr., Big “I” senior vice president of federal government affairs. “It is crucial that we renew this important federal backstop that would insure against these types of losses in a way that the private sector, at this time, simply cannot do.”
Businesses and insurers are starting to make decisions that impact operations beyond the potential sunset of the language and the expiration of TRIA. The lack of terrorism insurance would impact our economic security by potentially threatening billions of dollars in commercial property financing. Extending TRIA will guarantee access to coverage for two more years and ensure a continued boost to construction and job creation, while strengthening our economic growth and security and reducing the impact of any future terrorist attack prior to an attack with little cost to the government.
If there ultimately is no federal backstop in place, there is concern that adequate markets will not exist for this coverage and/or companies could not bear the high costs that likely would be necessary to purchase this type of coverage, and thus would go uninsured. This could create serious exposure issues in the event of a catastrophic terrorist attack. Such an event’s effects would be likely to go well beyond the businesses affected and in fact could have serious repercussions for the nation’s economy.
It is also difficult for insurers to assess and adequately insure this type of risk, given its unpredictable nature.
“Chairman Greenspan’s comments highlight our primary concern that the market can’t reasonably assess where a catastrophic terrorist attack may occur, and this uncertainty makes it nearly impossible to insure against it, leaving a serious void in the private marketplace. That is why we ask Congress to extend TRIA as soon as possible and continue to explore long term solutions,” Symington says.
Founded in 1896, the Big “I” is the nation’s oldest and largest national association of independent insurance agents and brokers, representing a network of more than 300,000 agents, brokers and their employees nationally. Its members are businesses that offer customers a choice of policies from a variety of insurance companies. Independent agents and brokers offer all lines of insurance—property, casualty, life, health, employee benefit plans and retirement products. Web address: www.independentagent.com.
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