View this article online: https://www.claimsjournal.com/news/national/2005/03/14/52526.htm
In an editorial set for publication in the April edition of PCI’s Executive Update, U.S. House of Representatives Majority Leader Tom Delay (R-Texas) outlined his vision for the future of the Terrorism Risk Insurance Act (TRIA) and his desire for a free market solution to the overall problem of insuring against terror.
“On December 31 of this year, TRIA will expire,” Delay wrote. “As Congress begins its debate on the future of how we insure against terrorism, it is imperative that the industry…work with Congress to develop a long-term solution that does not involve the federal government serving as a reinsurer or permanent backstop. Nor can the government become a funding mechanism for the insurance industry. If the industry will work with us on Capitol Hill to find a way to accomplish this, we will likely be more understanding of a limited, short-term program to help get it started.”
The bulletin noted that PCI members and staff are working diligently to identify and recommend a long-term solution to the terrorism insurance problem. “We understand the need for our industry to offer constructive solutions, recognizing the role that private insurers and private markets must play,” stated PCI Senior VP-Government Affairs, Carl Parks.
PCI President and CEO Ernie Csiszar was scheduled to testify before a March 4 Senate Banking Committee hearing on TRIA. That hearing was postponed and will be rescheduled in the near future. The bulletin noted that when the hearing is held Csiszar would acknowledge the need for a public/private partnership to effectively develop a long-term solution to the problem of financing terrorism risk, and would also outline several alternative approaches to address the issue, including the following:
— Federal support for giving insurers and insurance markets more freedom to negotiate terms and conditions of coverage by overriding state requirements on pricing and prohibitions of exclusions.
— An increase in retention levels so that private insurers accept more of the responsibility for paying terrorism insurance losses, coupled with a program that allows insurers to reduce their own individual retention levels.
— Enabling the industry to form a tax-exempt entity or entities to provide reinsurance or to allow companies to reduce their individual company retention level to some manageable level.
— Allowing the accumulation of funds through the establishment of individual company tax-deferred reserves.
“Right now these are just ideas, not fully developed solutions,” Parks noted. “PCI has been reviewing the merits and consequences – including unintended ones – of each and the association is committed to working with Congress to explore these options and create a solid, long-term partnership to address this critical problem.”