WASHINGTON -- Insurance officials from New York and the District of Columbia expressed support for a terrorism insurance "pool" during a congressional hearing Wednesday.
The idea of a pool, into which participating insurers would deposit a part of their written premiums, also won support from industry groups including the Council of Insurance Agents and Brokers and the Consumer Federation of America.
The New York, Washington, D.C. and insurance and consumer officials testified before a House Financial Services Committee panel looking into terrorism insurance.
Lawmakers are now debating alternatives to the federal Terrorism Risk Insurance Act, or TRIA, a federal backstop for the insurance industry set to expire Jan. 1. The Bush administration earlier this month said the program should be replaced with a new one that requires more private sector participation.
A variety of proposals for replacing the current program exist but the idea of a pool figured prominently in several written testimonies Wednesday.
"Developing a pool of private capital specifically designed to support terrorism writings will be a crucial component to any long-term solution," said Howard Mills, superintendent of insurance for New York.
Washington, D.C. Insurance, Securities and Banking Commissioner Lawrence Mirel said the creation by the federal government of a privately funded risk pool would be a "sensible approach" to replacing the terror program.
John Sinnott of the Council of Insurance Agents and Brokers also said a pool could reassure his industry.
"The existence of a terrorism insurance pool and backstop may make insurers more comfortable in the market, providing them with a reinsurance vehicle that will allow them to further expand capacity," Sinnott said in prepared remarks.
President Bush signed TRIA into law in November 2002, in the wake of the terrorist attacks of Sept. 11, 2001. The program was meant to be temporary from the start, and the Treasury Department has suggested a number of modifications if it is to be temporarily reenacted.
Treasury Secretary John Snow said the administration would accept an extension only if it increases to $500 million the size of the event that triggers coverage, and increases the dollar deductibles and percentage co-payments. It should also eliminate some lines of insurance, like commercial auto and general liability, Snow told Congress earlier this month.
In a pool system, participating insurers would deposit some percentage of their written premiums into the pool, explained Sinnott, also a vice chairman of insurer Marsh & McLennan, Inc. MMC. In the event of a qualifying loss from a terrorist attack, insurers would pay down a pre-established deductible before tapping into funds from the pool. A federal backstop would kick in after that, Sinnott said, laying out a general approach to a pool.
Senate Banking Committee Chairman Richard Shelby, R-Ala. has called for a targeted, short-term terrorism insurance program once TRIA expires Jan. 1. An extension is looking likely, though lawmakers still have numerous details to work out, including whether to include group life insurance.