As Congress debates a bill that would extend the Terrorism Risk Insurance Extension Act (TRIEA), many insurance experts say having some sort of terrorism insurance available is crucial, especially in the New York metropolitan area, a region well familiar with murderous fanaticism.
President George W. Bush initially signed into law the Terrorism Risk Insurance Act (TRIA) in 2002, and subsequently the TRIEA in 2005. The current bill is set to sunset at the end of this year.
The intent of both acts was to provide a federal “backstop” for insurance claims related to acts of terrorism.
TRIA created a federal reinsurance facility to provide coverage to insurance companies following a declared terrorism event.
The Mortgage Bankers Association endorsed both acts, and credited them for bringing stability to the commercial real estate insurance market. The association also supports the “long-term solution for terrorism insurance to be created,” according to its Web site.
Tim Dodge, director of research and external communication for the Independent Insurance Agents and Brokers of New York, also agrees with that sentiment.
“(TRIA and TRIEA) were created to allow time for the insurance industry to develop their own solutions,” regarding insurance against acts of terrorism, he said.
But that can be difficult due to the unpredictable nature of terrorist attacks, Dodge said.
“There are so many variables, and insurance companies are trying to develop predictive models, but it”™s hard, and that makes it harder to price,” he said.
Business or individuals can purchase a terrorism insurance “rider” with another policy, such as their fire, automobile, or workers”™ comp insurance plan.
In the New York metropolitan area, 77 percent of companies have purchased terrorism insurance, according to Marsh Inc., a risk and insurance services firm. That figure is up from 53 percent in 2004.
Among business sectors, financial institutions were at the top, with 81 percent purchasing coverage, the firm reports.
In total, about two-thirds of companies in the Northeast have purchased some sort of terrorism insurance.
Dodge said the amount of losses caused by the 9/11 attacks, in 2006 dollars, was $35.9 billion.
He said without TRIEA, the private reinsurance capacity for terrorism is between $6 billion to $8 billion.
“Without the extension of TRIEA, the available reinsurance will be woefully inadequate,” he said.
Dodge said many large-scale corporations in the New York area have some kind of terrorism coverage, while small- to mid-sized companies may or may not.
The amount of loss under the current program to trigger a claim under TRIEA is $100 million. Congress is currently debating whether to lower that figure to $50 million, which Dodge said would entice smaller, regional companies to purchase a policy.
Any entity, from a business, to a municipal government, to an airport, can purchase terrorism insurance.
While most of the larger international airports do so, Dodge said, “it”™s more of a judgment call” for regional airports.
Stewart International Airport in Newburgh does have a policy through its parent company, British-based National Express Group, said Tanya Vanasse, spokeswoman for the airport.
She said that policy will stay in effect until the airport comes under the auspices of the Port Authority of New York-New Jersey in October. At that point, the airport would be insured under the Port Authority, which purchased the lease to Stewart earlier this year.
Westchester County Airport also has similar insurance. Both airports, citing security concerns, declined to release their amount of coverage.
Currently, Dodge said TRIEA does not cover domestic terrorist attacks, such as the Oklahoma City bombing. The bill currently being debated would extend coverage to such attacks.
That same bill would also extend coverage to nuclear, biological and radiological attacks, which are also not currently covered under TRIEA.
“Unfortunately, this program is necessary,” Dodge said. “Ultimately, it protects the policyholders.”
