Transcript Terrorism Risk Insurance Act of 2002: An Overview

Terrorism Risk Insurance Act
Legislative Update
Midwestern Actuarial Forum
September 23, 2004
Debra Ballen
American Insurance Association
TRIA - Background
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9/11 terror attack = largest insured loss event
ever ($30B to $35B).
Commercial insurance industry capital base ≈
$100 B.
Plausible catastrophic terrorism scenario = $250 B
or more.
If terrorism insurance market collapses, US
economy is exposed to financial devastation from
terrorist attacks.
Terrorism Risk Insurance Act (TRIA) signed into
law 11/26/02, with 12/31/05 sunset.
Public Policy Agenda
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Insurers, reinsurers, and policyholders are
united in seeking a two-year extension of
TRIA.
To avoid/minimize market disruption,
legislation must be enacted ASAP.
Two-year extension will allow time to
complete Treasury study (due in June of
2005) and consider longer-term
alternatives for managing terrorism risk.
Where does the Issue Stand?
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Bills have been introduced in House and the
Senate.
House Committee mark-up scheduled for 9/29.
Challenges:
Short Congressional calendar;
Election-year politics;
Bill does not expire until the end of next year;
Despite wide, bipartisan support, some
opposition from consumer groups and fiscal
conservatives.
The TRIA Reauthorization Campaign
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Coalition to Insure Against Terrorism (“CIAT”) is
leading policyholder effort to extend TRIA.
Grassroots coalitions are in place in key states to
stress need and urgency.
Recent economic study by Dr. Glenn Hubbard
demonstrates broad economic need.
All efforts directed at finding a vehicle and
moving a bill.
Economic Issues
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Hubbard study demonstrates that TRIA is
working to stabilize insurance markets.
TRIA is “crowding in,” not “crowding out” private
sector capacity.
Absent TRIA, GDP will be $53 B (.4%) lower,
household net worth will be $512 B (.9%) lower,
and 326,000 fewer jobs will be created.
Study can be found at www.aiadc.org (research
section).
How Can Actuaries Help?
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American Academy of Actuaries has
published several papers on uninsurability
of terrorism risk (www.actuary.org).
Individual actuaries should urge Congress
to extend TRIA (www.extendtrianow.org).
Mobilize your friends, colleagues,
communities to push for TRIA extension.
Prognosis
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Passage of extension before October 8 is
an uphill battle.
A lame duck session is very possible and
provides another opportunity prior to
December 31.
AIA and others will continue to push for
extension of TRIA and consideration of
long-term alternatives.