RIMS backs 10-year extension and inclusion of domestic terrorism language; Cites concerns about NBCR impact on market
New York, N.Y., June 20, 2007 – The Risk and Insurance Management Society (RIMS) commends U.S. Congress and the House Financial Services Committee on the June 18 introduction of H.R. 2761, the Terrorism Risk Insurance Revision and Extension Act (TRIREA) of 2007.
"RIMS strongly supports the reauthorization of TRIA and believes that the introduction of this important measure represents the commitment of Rep. Mike Capuano, D-Mass., and Rep. Barney Frank, D-Mass., to protect the nation’s economic security," says Terry Fleming, member of RIMS Board of Directors and director of the division of risk management for Montgomery County, Maryland. "Acts of terrorism are difficult to predict, making them difficult to price. Without some type of certainty to make reasonable estimates of terrorism losses the insurance market will not provide coverage. This legislation goes a long way in ensuring that terrorism insurance remains available and affordable for U.S. companies, and to keep the market and national economy stable."
Congress passed the Terrorism Risk Insurance Act (TRIA) in 2002 to create a federal backstop to protect against terrorism-related losses. In 2005, the measure was extended for two years and is set to expire at the end of 2007. The newly introduced legislation offers significant improvements to the program. RIMS is pleased to see inclusion of language extending the existing program for an additional 10 years, eliminating the distinction between foreign and domestic terrorism, and addressing the issue of coverage for nuclear, biological, chemical and radiological (NBCR) events. Some other important provisions include setting the program trigger at $50 million; adding group life to the lines of insurance for which coverage must be made available; offering decreased deductibles and triggers for areas previously impacted by a significant terrorist attack; and establishing a Commission on Terrorism Risk Insurance to further study and evaluate the program moving forward.
The creation of a long-term program, which addresses both conventional and NBCR terrorism risk, is essential for the health of our economy. RIMS remains concerned, however, with a provision of H.R. 2761 that would expand the current program significantly by applying the "make-available" requirement to NBCR coverage. "Lumping the NBCR make-available provision with existing mandatory make-available provisions could diminish capacity," explains Mr. Fleming. "Because NBCR exposure is not calculable for premium purposes—and is therefore an uninsurable risk—the concern is that smaller companies may opt to leave the market, leaving larger companies to offer minimum limits at a high price."
Rep. Paul E. Kanjorski, D-Pa., chairman of the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, has scheduled a hearing to discuss the bill on Thursday, June 21.
RIMS has been intimately involved in the creation and extension of the TRIA program. RIMS members have testified before Congress, and RIMS has brought its message personally to Capitol Hill. RIMS remains committed to working with Congress as this legislation advances and the TRIA debate continues. For more information on RIMS legislative activities, visit www.RIMS.org/LegislativeAction.