Insuring against fear
Can you ever have enough insurance?
House, car, personal, business, pet ”¦. The list of people, places and things to insure can go on and on.
But how do you insure against terror?
After Sept. 11, 2001, this nation attempted to.
Congress enacted the Terrorism Risk Insurance Act (TRIA) on Jan. 23, 2002. Its purpose was “to ensure the continued financial capacity of insurers to provide coverage for risks from terrorism.” Since the variables to a terrorist attack are innumerable, Congress wanted to make sure the economy wasn”™t crippled. And so it wrote: “The United States Government should provide temporary financial compensation to insured parties, contributing to the stabilization of the United States economy in a time of national crisis, while the financial services industry develops the systems, mechanisms, products, and programs necessary to create a viable financial services market for private terrorism risk insurance.”
The lawmakers said the act would establish a “temporary federal program that provides for a transparent system of shared public and private compensation for insured losses resulting from acts of terrorism, in order to protect consumers by addressing market disruptions and ensure the continued widespread availability and affordability of property and casualty insurance for terrorism risk; and allow for a transitional period for the private markets to stabilize, resume pricing of such insurance, and build capacity to absorb any future losses.”
Please note the lawmakers”™ use of the word “temporary.” Congress gave it two more years of life in 2005; it”™s now set to expire at the end of the year.
As with any federal handout, once you make the gesture it”™s considered permanent. And the insurance industry apparently seems to think the same. However, there are exceptions to the rule.
Last month, U.S. Reps. Barney Frank, D-Mass., chairman of the House Financial Services Committee, and Michael E. Capuano, D-Mass., introduced a bill that added another 10 years of life and listed types of terror not included among private insurers: coverage for nuclear, biological, chemical and radiological attacks.
The Risk and Insurance Management Society has lobbied and testified in support of the bill.
Underwriting terrorism is no easy task; current premiums are not enough to cover incalculable losses.
“Acts of terrorism are difficult to predict, making them difficult to price. Without some type of certainty to make reasonable estimates of terrorism losses the insurance market will not provide coverage. This legislation goes a long way in ensuring that terrorism insurance remains available and affordable for U.S. companies, and to keep the market and national economy stable,” said Terry Fleming, member of the society”™s board of directors.
As terrorists continue to sow their fear worldwide, businesses need to depend on insurance in the event they become victims. In the New York metro region, the number of businesses that have terrorism insurance has risen from just above 50 percent in 2004 to 77 percent, according to risk and insurance services firm Marsh Inc. Across the Northeast, about two-thirds of businesses have terrorism insurance.
Tim Dodge, director of research for the Independent Insurance Agents and Brokers of New York, told staff writer Bryan F. Yurcan in an article in this week”™s edition that without the federal program the “available reinsurance will be woefully inadequate.”
Anyone can buy terrorism insurance. Stewart International Airport and Westchester County Airport have coverage. Small and mid-sized businesses may not have coverage because $100 million is the amount needed to trigger a claim under TRIEA. Dodge said if Congress cuts the claim amount to half, it might attract smaller companies to buy in.
The Bush administration opposes the House bill, arguing TRIA was never meant to be long term.
But neither should terrorism.