July 7, 2005
U.S. insurers urge terror insurance extension
WASHINGTON (Reuters) - The U.S. insurance and property
industries on Thursday said blasts that ripped through London
highlight the need for Congress to extend a program of
government guarantees to help cover losses from terrorism.
"The attacks in London reinforce the fact that this is
something we have to actively manage in the economy," said
solutions at Hartford Financial Services Group .
"It reinforces the need for a private and public
partnership to finance the risk," Lewis said.
But congressional sources and lobbyists in Washington said
the attacks in London were not likely to make U.S. lawmakers
move any more quickly in their debate over extending the
Terrorism Risk Insurance Act, or TRIA, before it expires at
Already, the Senate Banking Committee has a hearing on the
program scheduled for July 14.
While many Republicans and Democrats disagree on whether
the program is still needed, many key players on the committees
due to discuss the issue first have said TRIA will probably
need to be extended, at least for a short period.
TRIA was established after the Sept. 11, 2001, attacks and
created a temporary federal program of shared compensation for
losses from terrorist events. It was seen as critical to
sustaining construction and the economy at a time when insurers
were reluctant to offer coverage.
Under TRIA, insurers must make terrorism insurance
available. In return, the government guarantees it will
reimburse insurers for 90 percent of losses above certain
Critics of the program say the government should not be so
heavily involved in the insurance market and the private sector
should by now be able to provide coverage that property owners
and developers need.
But both buyers and sellers of the coverage have said
terrorism is a war-like risk and impossible to insure against
without government help.
"The attack in London underscores how much at risk we are,"
said Dennis Kelly, spokesman for the American Insurance
Association, which represents property and casualty insurers.
Some groups pushing for TRIA's extension also argue that
the government must play a long-term role in the market, and
point to Britain's terrorism insurance program, which has been
in place since 1993.
Under the UK program, created in the aftermath of Irish
Republican Army bomb attacks that caused billions of pounds of
damage, insurers pay a fixed premium into a pool.
If Thursday's blasts are confirmed as terrorist attacks,
the maximum amount insurers would have to pay on any attack
will be 75 million pounds ($131 million), capped at $150
million pounds if there are other attacks in the same year.
Above 75 million pounds, the pool covers the remaining
cost, and if more funds are needed, the UK Treasury steps in.
A similar pool-type structure is one of many options under
consideration in the United States, sources said.