While reauthorization of The Terrorism Risk Insurance Act (TRIA) is likely to receive strong support in Congress, success may come very late in the process, predicts Robert Gordon, SVP, policy development and research, for the Property Casualty Insurers Association of America (PCI) during the National Association of Insurance Commissioners’ (NAIC) Spring National Meeting in Houston yesterday.

Insurance for acts of terrorism was the topic for the NAIC’s Center for Insurance Policy and Research (CIPR) brunch event which featured speakers providing perspectives on the current and prospective private market for terrorism coverage, details on how the current program works and the importance of getting TRIA renewed on a timely basis.

“In 2002, 2005 and 2007, Congress hoped that the threat of terrorism would diminish and private mechanisms for terrorism protection could return to normal. While national security efforts have increased, terrorism remains a real and continuing threat,” said Gordon.

TRIA is a national security safety net to protect economic activity before and after a terrorist attack; it’s set to expire at year-end 2014. TRIA only applies with respect to attacks designed to coerce U.S. civilians or influence the policy or conduct of the United States, essentially protecting against a failure of U.S. terrorism interdiction, according to PCI.

“Terrorism is not an insurable risk,” said Gordon. “Neither insurers nor reinsurers can predict either the likelihood or severity of the next terrorist event. As a result, the need to protect against the economic effects of terrorism must be a shared responsibility between government and insurers.”

Gordon added that “a 2004 study by economist Glenn Hubbard found that without TRIA, significantly less private capital was available for terrorism coverage, and as a result, commercial policyholders would face steep price increases or in some cases would be wholly unable to obtain terrorism coverage.”

“Ultimately, Congress digs deeper into TRIA, they will appreciate that TRIA hasn’t cost taxpayers a penny in loss costs,” said Gordon. “TRIA requires the private sector to keep significant skin in the game—before and after an event—the federal backstop is only triggered in a truly catastrophic loss. TRIA is one of the better designed private sector-focused taxpayer-protection programs.”

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