TERRORISM RISK NOT CONFINED TO LARGE URBAN AREAS
Kentucky agents’ testimony before House committee urges federal backstop continuation
WASHINGTON, D.C., July 27, 2005—William G. Stiglitz III, a Kentucky independent agent and national officer of the Independent Insurance Agents & Brokers of America (the Big “I”), today told the House Financial Services Committee that the risk of terrorist attacks is a problem for business throughout America, not just in major urban areas.
As such, Stiglitz urged that Congress ensure a terrorism insurance program is in place after the expiration of the Terrorism Risk Insurance Act (TRIA) on Dec. 31. Stiglitz, an executive with the firm of Hyland, Block & Hyland, Inc., in Louisville, Ky., is the Big “I” national president-elect, and was the first private-sector witness to testify at today’s hearing.
“I would like to stress that the interest in, and the need for, a terrorism insurance backstop is NOT confined solely to big urban areas,” Stiglitz said in his testimony. “IIABA represents 300,000 agents and brokers and their employees selling coverage to consumers across the country on the front lines. Our collective experience establishes that terrorism insurance coverage is not just a big city or big state problem. It is a business customer problem throughout the country; this is a truly national issue.”
Stiglitz noted that the Treasury Department report issued June 30th stated that TRIA had achieved its goals of supporting the industry during a transitional period and stabilized the private insurance market, and expressed the agreement of the Big “I” that TRIA’s public-private partnership had worked as intended. But he noted the potential for harmful gaps in coverage faced by policyholders, beginning at year’s end, if there is no backstop in place when TRIA expires—a potential reinforced by recent terrorist activity.
“As access to insurance coverage diminishes, we continue to hear from the federal government—reinforced by the recent events in London and Egypt—that there remains a risk of further catastrophic terrorist attacks,” Stiglitz said. “Where insurers have not secured terrorism exclusions either due to state law … or because regulators will not approve them in some states, the insurers themselves will remain significantly exposed to terrorism losses and potential insolvency. As a result, entire sectors of the U.S. economy could be impacted by future terrorist attacks in the absence of a terrorism insurance program.”
Also in his testimony, Stiglitz noted the comments last week of Federal Reserve Chairman Alan Greenspan, who testified that there was “no way” for the private sector to handle the huge potential losses, and that he did not see how the issue of government-backed reinsurance for catastrophic terrorism attacks could be avoided.
“In testimony before this committee, Chairman Greenspan acknowledged terrorism and geopolitical risk have become enduring features of the global landscape,” Stiglitz said.
Stiglitz also noted the comments of Treasury Secretary John Snow and House Financial Services Committee Chairman Mike Oxley (R-Ohio), who acknowledged the need for a federal role in terrorism insurance.
“The Big ‘I’ and our 300,000 members are especially encouraged that members of this committee and Secretary Snow reaffirmed support for a continued federal role in assisting the private market in handling this risk of truly catastrophic proportions.”
The Big “I” has consistently supported the continuation of the current terrorism insurance backstop or a modified one, and it has repeatedly urged Congress to take action as soon as possible, since businesses and insurers are starting to make decisions that impact operations beyond the expiration of TRIA.
Founded in 1896, IIABA (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, and health—as well as employee benefit plans and retirement products. Web address: www.independentagent.com.
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