| A permanent solution to US terrorism risk insurance is a matter of national economic security: Willis
Testifying before the Senate Banking Committee on behalf of his company and the Council of Insurance Agents & Brokers, Bailey said the Terrorism Risk Insurance Act (TRIA) has been an unqualified success, and allowing it to expire at the end of this year would be ‘economically devastating.’ Both Willis, a global insurance broker, and the Council, which represents the leading domestic and international commercial insurance agents and brokers, favor a permanent or long-term government backstop program, Bailey said. “The most important issue for the broker community is maintaining access to coverage at a price the business consumer can afford,” he said. “In order to get this access, we need insurers who are able and willing to provide the coverage. It is clear that they cannot and will not be able to provide terror coverage without a federal backstop or some other mechanism to cap their exposure.” Bailey stressed that availability of affordable terrorism coverage is not just an issue for urban areas on the East or West Coast, nor is it limited to particular industries. “Industry reports indicate that the take-up rates are high across the country and across industries, and policyholders are generally willing to purchase terrorism coverage when it is available at an affordable price,” Bailey said. “For companies with a higher perceived risk, whether due to size, location, industry or other factors, the take-up rates are even higher.” “Within specific industrial sectors, the largest percentage of insureds buying terrorism coverage were in real estate, financial services, health care, media, hospitality, transportation and education. Even companies in the sectors with comparatively low take-up rates – energy and manufacturing, for example – each had take-up rates exceeding 30 percent in 2006.” The relatively high take-up rates are a sign of progress “toward the public policy goal of encouraging coverage in affected areas and industries,” he said. By comparison, only 11 percent of California customers are buying earthquake insurance despite the fact that the likelihood and severity of a major earthquake is far easier to model than a terrorist attack. He urged adding risks posed by nuclear, biological, chemical or radiation (NBCR) to the federal backstop program. “Extending the life of TRIA, expanding the program to better encompass NBCR exposures and readjusting its terms to address the changed parameters will keep terrorism coverage available and the market and economy stable,” Bailey said. The threat of terrorism remains ‘unabated and unpredictable,’ and this is not the time for the federal government to cease its involvement in the terrorism insurance market, he continued. “Allowing TRIA to expire at this time will certainly cripple, if not completely paralyze, a significant portion of our economy.”
•Date: 6th March 2007 • Region: US •Type: Article •Topic: Terrorism
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