AIA Informs N.Y. Legislators on Need to Extend TRIA

Congress needs to extend the Terrorism Risk Insurance Act (TRIA) in 2004 to avoid confusion and dislocation in the commercial insurance market, the American Insurance Association told a New York State Assembly hearing today.

“There is strong consensus among state insurance regulators, the insurance industry, and commercial policyholders that continuation of the federal backstop for terrorism insurance is essential. There also is strong consensus that due to insurance and business cycles, reauthorization cannot wait until shortly before the statute’s scheduled expiration at the end of next year,” said Eric Goldberg, AIA assistant general counsel. “Congress must take action in 2004 in order to avoid the kind of market dislocation that was so destabilizing prior to the law’s initial passage.”

Goldberg pointed out that insurance contracts that will be negotiated in late 2004 will extend beyond TRIA’s hard ending date of December 31, 2005. If TRIA is not extended, insurers would be exposed to the risk of terrorism without a federal backstop on those policies for the time period they would be in force during 2006.

AIA also told the New York legislators that the state should amend its Standard Fire Policy (SFP) to exclude fires caused by terrorism.

“The SFP is anachronistic. Notably, the SFP does not contain a specific exclusion for loss or damage due to fire resulting from a terrorist act, as it does for fire resulting from war. Yet the line between war and terrorism has become blurred. Like war, terrorism can be catastrophic, is often state-sponsored, and its operatives may be state-trained, though anonymous,” added Goldberg.