TRIA's expiration would drive up comp costs, insurer testifies
"This could lead insurers, where possible, to exit the workers' compensation market. For those that remain in the market, the extent of losses could impair the ability to pay the claims of injured workers."
Speaking on behalf of the Property Casualty Insurers Association of America, Lanza was on a panel addressing the Subcommittee on Insurance, Housing and Community Opportunity of the House Financial Services Committee. The hearing, held on the 11th anniversary of the 9/11 attacks, was aimed at giving the subcommittee insight into the impact of the Terrorism Risk Insurance Act, which is set to expire December 2014.
TRIA was adopted in 2002 and reauthorized in 2005 and 2007 in response to concerns about reinsurance capacity for large terrorism events. It requires private insurers to make terrorism coverage available and provides a risk-sharing mechanism for catastrophic terror events.
Since state laws generally mandate coverage for terrorist acts in the workplace, workers' comp insurers cannot exclude them from coverage. Therefore, TRIA takes on a special importance for the system, proponents say.
"As a direct result of 9/11 losses, workers' compensation insurers have restricted coverage for employers with aggregations of workers within a single facility or in large metropolitan areas," said Janice Ochenkowski, on behalf of the Risk Insurance Management Society. "Without some form of backstop like TRIA, RIMS believes insurance companies will review their portfolios of business and will refuse to continue covering certain risks in areas where exposure is greatest," including for workers' comp.
Ochenkowski related that many members of RIMS had trouble obtaining workers' comp coverage following 9/11 until TRIA was adopted. She said a majority of RIMS members surveyed said Congress needs to reauthorize the program or there will again be issues of affordability and availability.
TRIA acts as a form of reinsurance for terrorist events. It is substitute capital for insurers, Lanza explained.
"Without it, more capital would be required to support workers' compensation writings," he said. "This would certainly drive up the cost of workers' compensation insurance."
Read more at the WorkersComp Forum homepage.
October 18, 2012
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