As the President’s working group (PWG) continues to create a statutory report on financial markets, the American Insurance Association (AIA) filed its comments on the state of the terrorism risk insurance (TRIA) market, emphasizing that TRIA’s public-private partnership remains necessary to provide stability and prevent economic disruption.

The PWG is required to perform an ongoing analysis and submit a statutory report to Congress on the long-term availability and affordability of insurance for terrorism risk.

While just one argument has been publicly made against renewing the program, industry groups, including the Consumer Federation of America and the Property Casualty Insurers Association of America, have been voicing support since April.

AIA’s argument attempts to establish terrorism as an uninsurable risk, therefore requiring partnership with the government.

Some of the points emphasized in the argument are: First, because terrorism involves willful actions by individuals or groups intent on causing maximum harm, it defies the predictability necessary for insurance; second, relevant information involves national security intelligence not available to the public, including the insurers that underwrite the risk, the businesses seeking insurance, and the reinsurers and other risk-spreading mechanisms that provide support for the primary carriers; and third, terrorism is a dynamic risk, so that efforts to harden one target may simply cause the terrorist to shift to a softer target.

AIA also pointed to the success experienced in the program’s first 11 years as evidence that Congress should not increase insurer retentions, either through deductibles or co-shares, as such a move could threaten the public-private balance currently achieved by the program.

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