Washington - The Terrorism Risk Insurance Act (TRIA), a temporary program introduced after the Sept. 11 terrorist attacks, has served its purpose and is probably stunting the development of the private insurance market, Treasury Secretary John Snow wrote in a letter to the Senate Banking Committee summarizing the agency's conclusions regarding TRIA.
Any extension should recognize the temporary nature of the program, the rapid development of a private market and the need to reduce the cost to taxpayers of a terrorist attack, Snow added.
Congress passed TRIA in November 2002 after private insurers refused to cover terrorism-related losses in the wake of the Sept. 11 attacks, and President Bush subsequently signed it into law.
The law requires insurers to provide coverage for commercial risks and, in return, guarantees that the U.S. government will pay 90% of losses after an initial deductible, up to $100 billion a year.
The insurance industry has been pushing Congress to extend the program before it runs out at the end of 2005.
But before such a decision is made, the Treasury had to report on the effectiveness of the program and study whether the private insurance market is capable of taking on the risks by itself.
"The industry wants the backup," said Andy Barile, an insurance consultant in Rancho Santa Fe, Calif. "But since they're coming off their most profitable year in history, the question is why give them this?"
The Treasury said it would only accept an extension of TRIA if the program were whittled down from its current form.
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