WASHINGTON, D.C., March 5, 2007—In the heart of the world’s financial markets, the Independent Insurance Agents & Brokers of America (the Big “I”) today urged Congress to protect the country’s economic stability by ensuring availability of terrorism risk insurance through a continued federal role.
The Big “I” testified before the House Financial Services Committee’s Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises during a field hearing in New York City.
The association thanked the committee members and Congress for recognizing the importance of a federal role in terrorism insurance by enacting the Terrorism Risk Insurance Extension Act (TRIEA) of 2005. The original enactment of TRIA in 2002 and its extension have been successful in stabilizing the insurance marketplace and have helped eliminate the market disruptions and uncertainties witnessed in the wake of September 11.
“It is well known that the insurance community performed admirably in the immediate aftermath of September, 11 2001, honoring its commitment and providing resources needed to quickly and fully pay claims and thus playing a pivotal role in the recovery-and-rebuilding process,” according to the Big “I” in its written testimony. “However, even though the insurance marketplace responded effectively to the 9/11 losses, it was quickly apparent, and remains so today, that insurers could not handle the risk of further large-scale terrorist events without a federal backstop.”
The association noted that the insurance market’s ability to protect the American economy from the financial consequences of terrorism risk is a critical component of national security during the ongoing war on terror.
“As former Federal Reserve Chairman Alan Greenspan and other notable experts have asserted, the private insurance market is simply not in a position to handle the unpredictable nature and possible immense size and scope of terrorist attacks,” the Big “I” testified. “Despite the warnings of these experts, a specific plan for developing a private reinsurance mechanism to spread catastrophic risk from terrorism has yet to emerge. Now is the time to develop a long-term public-private partnership.”
If the federal role lapses, terrorism risk coverage would become inordinately expensive and probably unavailable to many businesses. The association emphasized that while terrorism risk coverage is critical in cities like New York, it’s not just a “big city” or “big business” problem—the economic impact would be widespread if the coverage becomes unavailable.
“As take-up rates have gone up across the country, we have seen terrorism coverage purchased by a wide and diverse variety of interests, from small towns in Mississippi to small and large businesses in New York City,” the association said. “Our members remain concerned that the needs of many policyholders will not be met with affordable and good quality coverage for this peril if there is no terrorism insurance program in place after Dec. 31, 2007.”
Charles E. Symington Jr., Big “I” senior vice president for government affairs and federal relations, pledges the Big “I” will keep working to secure a continued federal role in terrorism risk insurance.
“The Big ‘I’ is coordinating closely with other insurance trade associations, individual insurance companies, and commercial policyholder groups to extend the current terrorism insurance program at the end of the year,” Symington says. “We would like to thank Insurance Subcommittee Chairman Paul Kanjorski and Ranking Member Deborah Pryce for holding today’s field hearing to shed light on the continued need for federal reinsurance in the terrorism insurance market. We will continue to work with these Congressional leaders and others to ensure that a long-term federal backstop is in place at the end of 2007.”
Founded in 1896, IIABA (the Big “I”) is the nation’s oldest and largest national association of independent insurance agents and brokers, representing a network of more than 300,000 agents, brokers and their employees nationally. Its members are businesses that offer customers a choice of policies from a variety of insurance companies. Independent agents and brokers offer all lines of insurance—property, casualty, life, and health—as well as employee benefit plans and retirement products. Web address: www.independentagent.com.