PCI, Insurance Executives Testify on Terrorism Risk Re-Authorization Before U.S. Senate Committee on Banking
Feb 26, 2014
Speaking on behalf of the Property Casualty Insurers Association of America at a U.S. Senate Committee hearing on terrorism risk insurance yesterday, February 25, 2014, PMA Insurance Group CEO Vincent Donnelly urged a re-authorization of the Terrorism Risk Insurance Act (“TRIA”) as critical, adding that “The private insurance markets are not willing to accept every risk-particularly unpredictable and potentially catastrophic risks like terrorism.”
Held by the U.S. Senate Committee on Banking, Housing and Urban Affairs, (“Committee”) the hearing was entitled “Re-Authorizing TRIA: The State of the Terrorism Risk Insurance Market, Part II.”
Mr. Donnelly joined Risk and Insurance Management Society President Carolyn Snow and other insurance executives on yesterday’s witness panel. To access each of their written testimonies, click on the hyperlinks below.
Mr. W. Edward Walter, President and CEO [view testimony]
Host Hotels & Resorts, on behalf of the Coalition to Insure Against Terrorism
Ms. Carolyn Snow, President [view testimony]
Risk and Insurance Management Society
Mr. Bill Henry, CEO [view testimony]
McQueary, Henry Bowles and Troy, on behalf of the Council of Insurance Agents & Brokers
Mr. Vincent T. Donnelly, President and CEO [view testimony]
PMA Insurance Group, on behalf of the Property Casualty Insurers Association of America
Mr. Warren W. Heck, CEO and Chairman of the Board [view testimony]
Greater New York Insurance Companies, on behalf of the National Association of Mutual Insurance Companies
Mr. Douglas G. Elliot, President of Commercial Markets [view testimony]
The Hartford, on behalf of the American Insurance Association
In his opening remarks, Committee Chairman Tim Johnson (D-SD) explained that Part 1 of the TRIA hearing held last fall included testimony on TRIA’s history, necessity and its “extensive layers of taxpayer protections.” He also remarked on the role the private insurance market is able to play because of TRIA’s existence and structure, not in spite of it, and cautioned that any drastic changes to the program could negatively affect small insurance providers and policyholders.
In addition to those witnesses appearing in person yesterday, Chairman Johnson said written testimony had been submitted by the Insurance Information Institute, Financial Services Roundtable and the Reinsurance Association of America. He also recognized the support of Democratic Senators Reed, Menendez, Schumer, Tester, Warner, Murphy, Klobachar and Franken, along with Republican Senators Kirk, Heller and Blunt.
In his statement, U.S. Senator Mike Crapo (R-ID), Ranking Member of the Committee, reminded that TRIA originally was created to address what was thought at the time to be a temporary inability for private companies to insure against terrorism risk. While that need has abated and private capital can take on more of the exposure to terrorism, the need for TRIA still exists, he said.
At a November hearing in the House Financial Services Committee, a global reinsurer representative stated that the reinsurance industry has the ability and willingness to expand capacity. She commented that an increase in the industry retention and an expansion of the co-insurance level could serve as positive modifications to the TRIA program. Others suggested raising either the amount of the company deductible or the $100 million loss trigger.
Senator Crapo said his goal was to seek ways to adjust these levers in a manner that increases taxpayer protections, while continuing to provide an adequate backstop to the market.
“While changes to the TRIA program levers are necessary, re-authorization gives us the chance to examine other changes that might make the program better,” he explained. “For example, some industry participants suggest that the process for event certification may be improved. One way to do that would be to require the Treasury Secretary to make the certification within a given number of days following a terrorist event.”
Elaborating further, Senator Crapo said that, since insurers typically pay claims almost immediately, any timeline may result in unnecessary delays that may conflict with state law. “I am interested in the thoughts of our panel on how adjusting certification might impact the TRIA program, as well as any other areas of the program that could benefit from clarification.”
During yesterday’s hearing, U.S. Senator Charles E. Schumer (D-NY) announced that he will work with a bipartisan group of Senators to introduce legislation to re-authorize and extend TRIA, which is scheduled to expire at the end of 2014.
Calling TRIA’s re-authorization a critical priority for post-9/11 New York, Senator Schumer explained that his proposed legislation would help to spur new development and protecting existing real estate in high-risk urban areas like lower Manhattan. TRIA was re-authorized in 2005 and in 2007.
“The TRIA program is one of the best, if not the best, post-9/11 examples of government partnering with the private sector to solve problems that neither can solve on their own,” Senator Schumer said, reminding the Committee that TRIA has enabled private insurance companies to provide policies in high-risk areas and to high-risk developments such as stadiums, malls, ports and airports.
Senator Schumer urged his colleagues to work with him to quickly pass a bill since policies are starting to be written that extend into 2015. Without certainty about the availability of the TRIA program moving forward, he said it is unclear whether policies will maintain the same protections as they have had in the past against losses sustained as the result of a terrorist attack.
News headlines generated by yesterday’s hearing are hyperlinked below.
- RIMS testifies on TRIA
- Some Drama Over TRIA Extension
- Schumer Announces Bipartisan Legislation to Re-Authorize TRIA
- “Vital” that TRIA is extended
- Coalition Urges TRIA Extension
- Hotel industry urges extension of terrorism risk program
- Heftier premiums coming for terrorism insurance?
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