Chief executive officers at a handful of property/casualty insurers are divided over whether the federal insurance backstop used to compensate companies if they fall victim to a terrorist attack will be renewed.
Failure to renew the law, known as the Terrorism Risk Insurance Act, could wipe out insurers flooded with claims stemming from an attack like the ones that occurred on Sept. 11, one executive warned.
"We are convinced that we will get TRIA extended but we're going to have to give up some things," said Edmund F. Kelly, chairman, president and CEO of Liberty Mutual Group.
Kelly also said he expected that the industry would have to give in to higher deductibles.
But others industry titans weren't so sure.
"I wish I could be optimistic about it, but I think the way things look right now the extension of TRIA is really very uncertain," said Warren W. Heck, chairman and CEO of the Greater New York Mutual Insurance Co.
John P. Phelan, chairman and CEO of American Re-Insurance Co., said he expected some kind of deal to be struck because not doing so could go so far as to damage the U.S. economy.
"I think the real estate industry and other industries really need to begin to appreciate that there simply isn't enough capacity around and whatever ? there needs to be some government backstop at some point to provide sufficient capacity to finance economic recovery in the wake of a terrorist act."
Under enormous pressure from the real estate industry, Congress passed TRIA as a way to offer coverage following the attacks of Sept. 11.
In subsequent years, however, very few businesses nationwide actually took out terrorism risk insurance policies. Those that did tended to operate in big cities like New York, Chicago, Los Angeles and Washington, D.C.
"I quite agree that we need a permanent solution but I don't think that we can have one without the government involved," added Heck. The men spoke at the Joint Industry Forum in New York in January.
February 1, 2005
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