Of the many cuts included within the Obama administration’s proposed annual budget, terrorism risk insurance remains a hot button issue, as the insurance industry reacts to news that changes to the
This is not the first time the administration has called for TRIA changes; last year their proposals were sent to Congress, which never fully addressed the issue. Those proposed changes were to the original TRIA agreement— the Terrorism Risk Insurance Act of 2002. This government backstop would be triggered specifically by a catastrophic terrorist attack. The program was modified and renewed in 2005 and then again for seven years in 2007.
In documents released yesterday, however, the White House said its proposal would eliminate “nearly $250 million in federal subsidies to insurance companies for terrorism insurance. These subsidies are no longer necessary given the robust private market for such insurance, and domestic terrorism insurance policies are now sufficiently available and affordable to meet demand. According to industry data, property/casualty insurers’ surpluses—the balances available to pay claims associated with covered terrorist attacks—are currently estimated at over $490 billion.”
Upon hearing the news, the
"Any attempt to modify this reauthorization would have a detrimental impact on the availability and affordability of terrorism risk insurance," AIA spokesman Blain Rethmeier said in a statement.
As rationale for the changes being recommended to TRIA, the budget proposal noted that, "by reducing this insurance market subsidy, the proposal would encourage the private sector to mitigate terrorism risk through other means."
The assertion that the property/casualty industry would be able to absorb additional costs in a healthier economy drew fire from another industry group, the