FOR IMMEDIATE RELEASE
NEW YORK, May 8, 2013 — The federal Terrorism Risk Insurance Act (TRIA) not only restored stability to the U.S. insurance and reinsurance markets amid the unprecedented market dislocations after September 11, 2001, but TRIA also continues to deliver benefits to the overall economy, at little to no cost to taxpayers, according to the
Insurance Information Institute (I.I.I.)
“Private-sector insurers have difficulty pricing terrorism risk insurance because neither the prospective frequency nor the potential cost of man-made, intentionally violent acts can be accurately assessed before they occur,” stated Dr. Robert Hartwig, president of the I.I.I., and an economist who has studied the insurance ramifications of the September 11 attack extensively.
Dr. Hartwig’s observations were in response to the Consumer Federation of America’s (CFA) statement earlier today, which publicly questioned the need to extend TRIA beyond 2014, given the property/casualty insurance industry’s cumulative policyholders’ surplus, which currently stands at nearly $600 billion.
“The American Academy of Actuaries years ago estimated that hundreds of billions of dollars in insured claim payouts could be generated by a single terrorist attack in one city, so there is a role for the federal government to play when it comes to sharing in the very substantial risks the nation faces. Strangely, the CFA presumes to have more knowledge about the likelihood and cost of future terrorist attacks than the insurance industry and federal government combined,” Dr. Hartwig stated.
Dr. Hartwig also countered the CFA’s assertion that near record policyholders’ surplus is reason enough for allowing TRIA to expire. He noted that the statement is incorrect because much of the surplus cited as available to pay claims arising from terrorist attacks actually backs lines of coverage not covered under TRIA at all, including homeowners, auto and medical practice insurance, to name a few.
Enacted in November 2002, the federal Terrorism Risk Insurance Act (TRIA) established a risk-sharing structure that allows the federal government and the insurance industry to share losses in the event of a major terrorist attack. The current iteration of TRIA, the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA), expires at the end of 2014.
“The looming expiration of TRIPRA brings to a head the question of whether terrorism risk now, or ever, will be one that can be managed entirely within the private sector. The evidence, both in the United States and from similar programs abroad, is that market stability in terms of both pricing and availability of terrorism coverage, as well as the ability to maintain adequate and expanding levels of capacity over time, are contingent on the continued existence of the Terrorism Risk Insurance Program,” Dr. Hartwig concluded.
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