The Risk and Insurance Management Society, Inc. (RIMS)
Position Statement on
The Extension of the Terrorism Risk Insurance Act
RIMS strongly supports legislation to extend the Terrorism Risk Insurance Act (TRIA) for an additional two years and encourages Congress to approve this legislation as soon as possible. RIMS member companies, which include 84 percent of the Fortune 500 corporations, are concerned about the capacity of workers’ compensation and property/casualty insurers to underwrite terrorism coverage without a federal backstop in place. As a reinsurance backstop, TRIA opens commerce by quantifying the maximum loss exposure so that insurers and reinsurers can operate their businesses prudently. With possible losses known, insurers and reinsurers can continue to offer commercial insurance to corporations, public and private entities that need terrorism coverage. Prior to the enactment of TRIA, and after the January 1, 2002 expiration of reinsurance contracts, required limits of commercial insurance were not available. TRIA continues to meet the needs of a significant portion of the risk management community, and for them, TRIA remains a critical need.
RIMS members who have a concentration of employees in a single location had difficulty in purchasing workers’ compensation insurance after September 11, 2001 and prior to passage of TRIA. TRIA provided market support to ordinary employers, not just owners of target buildings or businesses in a few major cities. Returning to this market restriction could impact the operations of a significant number of RIMS members.
RIMS is concerned that the stable reinsurance market that policymakers anticipated when they determined a timeline for TRIA does not yet exist. Because of a variety of other market-driven losses, the current reinsurance market is not stable, and will not be able to fully assume the risk of terrorism, which is extremely difficult to predict or price.
RIMS believes TRIA extension legislation is necessary to avoid the market disruptions that occurred after September 11, 2001, and before the adoption of TRIA. This legislation will ensure that terrorism insurance is available to buyers of commercial insurance in a comprehensive and affordable manner. Reliance on TRIA is critical in the short term, but RIMS feels that it is imperative to find other mechanisms to provide effective and reasonable commercial insurance options against catastrophic terrorist attacks. To that end, RIMS also welcomes the provision that directs the Treasury Department to provide a report to Congress on long-term solutions for expanding the availability and affordability of terrorism insurance without a federal backstop. This extension of TRIA is critical to our members and the future of our businesses. Therefore, we urge the passage of this legislation.