Calling terrorism an “uninsurable social risk,” the legal and regulatory affairs director of the National Association of Mutual Insurance Companies (NAMIC) has encouraged the American Legislative Exchange Counsel (ALEC) to back an extension of the federal terrorism insurance program.
Peter Bisbecos told the ALEC Homeland Security Working Group at its meeting on Wednesday that the mandated Dec. 31, 2005 sunset of the Terrorism Risk Insurance Act of 2002 (TRIA) will come too soon to determine if and how the insurance industry can address the terror risk.
“Terrorism risk is neither a private or public risk, but a social risk, and we cannot rule out any option that would ensure economic security after a terrorist event,” asserted Bisbecos. “NAMIC supports a reformed system of state regulation, but we see this issue as distinct. At this point, terrorism remains uninsurable. Due to the uncertain magnitude and frequency of the risk, a government presence is needed to provide certainty in times of national emergency and to allow insurers more time to determine a market-based response.”
Bisbecos said that ALEC, the nation’s largest bipartisan, individual membership organization of state legislators, could play a critical role in securing a two-year TRIA extension because of the organization’s reputation as the leading free market legislative organization. He asked the Working Group to consider recommending endorsement of an extension to the full ALEC membership.
“One of the key objections to federal involvement in terrorism insurance is that it will prevent the emergence of private sector solutions to terror insurance,” Bisbecos noted. “Insurance is an inherently competitive industry. Federal involvement would not be invited in an area where a business opportunity existed. Our support for the extension of TRIA is a clear indication that a marketplace solution is yet to become viable.”
The working group agreed to continue consideration of this issue.
Was this article valuable?
Here are more articles you may enjoy.