As the President’s Working Group on Financial Markets studies the necessity of the Terrorism Risk Insurance Act (TRIA) program, insurers say the program is continuation of the program is vital.

David Golden, senior director of commercial lines policy for the Property Casualty Insurers Association of America, said given the potential losses of a terrorist strike, federal support is imperative.

“Capital has been, and will remain, the key to making terrorism risk insurance available in the U.S.,” Golden said. “Only the federal government has sufficient capital resources to back terrorism insurance due to the catastrophic loss potential.” 

Moreover, the need for secrecy around national security makes terrorism risks difficult to underwrite, Golden said. “Development of mitigation techniques continues to be hampered by the necessity for the federal government to keep intelligence about terrorist threats classified. The fact that government cannot realistically share essential underwriting information about terrorist risk with insurers reinforces the need for continuation of TRIA beyond its scheduled 2014 expiration.” 

J. Stephen Zielezienski, SVP and general counsel of the American Insurance Association agreed that terrorism risk is essentially uninsurable without government participation.

“Given the continued grave uncertainty and potentially catastrophic levels of loss,

sound insurance practices and the tools insurers have developed to manage other catastrophic risks are simply inadequate to underwrite and price this risk without a governmental mechanism to limit volatility,” Zielezienski  said. “All of these problems are greatly exacerbated with respect to chemical, nuclear, biological, and radiological (CNBR) terrorism risk, for which there is no meaningful private sector capacity that is provided on a truly voluntary basis.”

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