D.C. at Risk If Terror Insurance Act Lapses; White House Backs Letting Industry Take Over
Byline: Tom Ramstack, THE WASHINGTON TIMES
The insurance and real estate industries are warning that Washington's economy will suffer unless Congress renews the Terrorism Risk Insurance Act (TRIA), which is set to expire Dec. 31.
The Bush administration says allowing TRIA to expire would create incentives for the commercial insurance industry to assume the financial risks.
The Homeland Security Department lists Washington's government buildings as high-risk targets for terrorists. TRIA provides a government bailout for the insurance industry for any claims greater than $30 billion if a terrorist strike results in policy claims.
"Catastrophic terrorism is potentially so immense that it's beyond the financial capacity of the insurance industry," said Dennis Kelly, spokesman for the American Insurance Association.
After the September 11 attacks, which caused $32.5 billion in insured losses, insurance rates skyrocketed, forcing some real estate developers to delay projects and lay off workers because of the increased costs.
Most lenders have required terrorism insurance since the September 11 attacks.
Congress enacted the federal subsidy under TRIA in late 2002 to reduce insurance rates enough for projects to continue.
If TRIA is not renewed, the American Insurance Association has suggested that it be replaced with a "pool" fund financed jointly by government and industry to pay terrorism claims, similar to the one used in Britain.
The insurance industry estimates that claims from another major terrorist attack could cost $50 billion to $100 billion or more - with nuclear or biological attacks representing the greatest risk.
Commercial insurance companies that would cover the claims have access to only $114 billion, said Robert P. Hartwig, chief economist for the Insurance Information Institute, an industry trade group.
He called commercial insurance and reinsurance funds "clearly inadequate."
Under TRIA, the insurance industry must pay the first $30 billion in insured losses from an attack. …