By Jessica Holzer - 04/23/07 08:57 PM EDT
Under the agreement between the Coalition to Insure Against Terrorism Risk (CIAT) and the American Insurance Association (AIA), all property insurers would be forced to sell insurance for such attacks, but the federal government would step in to cover losses above a certain amount.
The move irked two of the major insurance trade groups that had been working with CIAT and AIA to form a unified position on the federal program. They support a federal role in covering NBCR threats, but favor a program in which the government covers all the losses, such as in the National Flood Insurance Program.
“For this proposal to come out of left field when everyone is supposedly working together, that was surprising,” said Ben McKay, the senior vice president for federal government relations at the Property Casualty Insurers Association of America (PCI).
PCI and National Association of Mutual Insurance Companies (NAMIC) sent a letter to AIA on Monday voicing their concerns.
A hearing today in the House will explore proposals for renewing the legislation, which is known as TRIA. House Financial Services Chairman Barney Frank (D-Mass.) has said he would introduce a bill in April.
Since the Sept. 11, 2001 terrorist attacks, railroad companies, petroleum refiners, manufacturers and other large property insurance policyholders have complained of the difficulty of obtaining coverage for NBCR risk. But the insurance industry has balked at covering such threats, arguing that it would expose them to incalculable losses. The industry opposed the addition of NCBR risk to the House-passed version of legislation to extend the federal program in 2005.
The deal struck between AIA and CIAT splits the industry between the small players and large companies, such as The Hartford and Liberty Mutual, that sell workers’ compensation policies. NBCR risk cannot be excluded from the workers’ comp policies.
The American Academy of Actuaries estimated that an NBCR attack could cause up to $700 billion in insured losses. The losses to companies that write workers’ comp could be particularly steep because the claims cannot be capped as they can in other lines of insurance.
“If you’re a workers’ comp writer, this is the issue that keeps you up at night,” McKay said.
CIAT and AIA also announced that they would push to remove the distinction between foreign and domestic acts of terrorism and urge Congress to make the program permanent.
This will be a sticking point with the Bush administration, which renewed the federal backstop only reluctantly in 2005.
“The administration continues to believe that TRIA was meant to be a temporary program,” a spokeswoman from the Treasury department said.