Senate Banking Committee to Hold Hearings on Terrorism Risk Insurance Program

Strategic Insights -

The U.S. Senate Banking Committee has announced that it will hold a fresh round of hearings on the federal Terrorism Risk Insurance Program, amidst a Treasury Department study recommending against renewing the program in its current form. The hearings aim to explore the program's effectiveness in addressing terrorism risk and potential solutions to modify or replace it. Committee Chairman Sen. Richard Shelby, R-Ala., has expressed concerns about the program's "considerable market dysfunction" and its impact on the development of broader solutions for terrorism risk.

Key Takeaways:

  • The Senate Banking Committee will hold hearings on the Terrorism Risk Insurance Program, despite a Treasury Department study recommending against renewing it in its current form.
  • The hearings aim to explore the program's effectiveness in addressing terrorism risk and potential solutions to modify or replace it.
  • Committee Chairman Sen. Richard Shelby, R-Ala., has expressed concerns about the program's "considerable market dysfunction" and its impact on the development of broader solutions for terrorism risk.
  • The program is set to expire at the end of the year, and any extension should be narrow, targeted, and minimize interference with markets.
  • The Treasury study's conclusions have been met with criticism from insurers and their policyholders.
  • Private reinsurance market capacity has been unable to provide adequate coverage for terrorism risk, with some predicting that a market for terrorism insurance and reinsurance may never develop.
  • The federal government may be required to extend the program to provide time to address market dysfunction and ease the sunsetting of the program.

Statistics:

  • The Terrorism Risk Insurance Act was passed in 2002.
  • The program is set to expire at the end of the year.
  • 70-member advocacy group, the Coalition to Insure Against Terrorism, has expressed criticism of the Treasury study.
  • Private reinsurance market capacity has been unable to provide more than modest capacity to cover terrorism risk.
  • The TRIA program pays 90% of terrorism losses up to $100 billion above a 15% industry deductible.

Sources:

  • "Treasury Study Recommends Against Renewing TRIA in Current Form" by A. M. Best Company, Inc., July 1, 2005.
  • "Senate Banking Committee to Hold Hearings on TRIA" by COMTEX.
  • "Coalition to Insure Against Terrorism" press statement.
  • "Reinsurance Association of America" press statement.
  • "National Association of Mutual Insurance Companies" press statement.