TRIA was designed as a temporary, backstop measure to keep the economy moving by allowing the government to subsidize and support the insurance and re-insurance industry against a major terrorist event. This report, developed by the CBO was to reassess TRIA in light of today's current events and the fact that TRIA is scheduled to expire at the end of 2005.
The highlights: (emphasis, bold and highlights, mine)
- "...there is a growing perception that the risk of
terrorism is likely to remain high. That development suggests
that property owners and businesses need to take
measures to reduce their exposure to that risk. They
would have a stronger incentive to take such measures if
the insurance subsidies conveyed through TRIA were reduced
- "...the underwriting capacity
of the insurance industry has recovered greatly. That
change implies that private insurers can play a bigger role
in providing terrorism coverage."
- "If TRIA expired as planned, premiums for terrorism insurance
would be likely to rise, perhaps substantially. Not
only would the end of federal subsidies drive up rates in
the private sector, but the uncertainty associated with the
risk of terrorism could lead insurers to charge higher premiums
than they would if they had more-precise estimates
of the probability, frequency, and size of possible
- "The study predicted that economic growth would be
slowed because higher premiums for property insurance
(and a resulting decrease in property values) would raise
operating costs for businesses and because higher premiums
for workers’ compensation would increase labor
- "Reinsurers would also probably continue to exclude losses
related to nuclear, biological, and chemical attacks from
their coverage. That exclusion would be important
mainly for the workers’ compensation market, since primary
insurers for that type of policy must cover loses
from all causes. Potentially, insurers would be unable to
diversify that catastrophic risk, at least in the near term,
so rates for workers’ compensation policies could rise substantially."
The report goes into detail about assumptions, macroeconomic models, etc.
Here's the upshot: IF TRIA expires, you will pay more for workers compensation insurance. I am not here to make assessments of the policy or the CBO's work. I want you to know what is happening so you can prepare. Consider this as you would a tsunami alert.
The big IF here is will Congress allow TRIA to expire. The battle has been joined by the insurance industry for sure.
The Big "I", the Independent Insurance Agents Association, has this to say:
"Renewal of TRIA is crucial to the ability of our industry to cover catastrophic losses related to terrorism and also to preserving confidence in the marketplace," Symington says. "Existing TRIA legislation expires at the end of this year, and it is crucial that we get this act renewed as quickly as possible."
From the National Underwriter:
"Julie Rochman, an official at the American Insurance Association, Washington, says the fact that the CBO analysts minimize the cost of letting the TRIA program die is "disappointing.""
The Professional Insurance Agents of America (PIA):
"Agents and brokers should encourage clients to contact their legislators in support of extension of the Terrorism Risk Insurance Act (TRIA). That was one suggestion offered by PIA National Senior Vice President Patricia A. Borowski."
Here's my press release on the same subject:
This one bears watching. The Department of Treasury is scheduled to release its assessment in June.