NAMIC has joined with PCI in urging congressional leaders to keep mandatory NBCR coverage out of legislation to extend the Terrorism Risk Insurance Act. In a letter being delivered to Sen. Chris Dodd, D-Conn., and Rep. Barney Frank, D-Mass., NAMIC and PCI said the government should establish a commission to study all the risks associated with nuclear, biological, chemical and radiological attacks, rather than requiring private insurers to offer coverage for them.
The congressional leaders are considering extending TRIA beyond its Dec. 31 sunset date. While the property/casualty industry strongly supports such proposals, NAMIC and PCI urge Congress to remove NBCR from the equation at this point.
“From an insurance standpoint, NBCR events are qualitatively and quantitatively different from events arising from the use of conventional terrorist weapons,” the letter says. “Indeed, even before the atrocities of September 11 exposed the vulnerability of the United States to large-scale terrorist attacks on American soil, insurance companies and insurance regulators had long regarded losses caused by nuclear incidents as uninsurable.”
The letter points out that in the nearly six years since the Sept. 11 attacks, no private reinsurance has been offered for NBCR coverage, and capital markets have not developed any alternative risk transfer products for such events. “That this state of affairs is unlikely to change is reflected in a 2005 RAND report observation that NBCR attacks ‘pose a challenge that may be most appropriately covered through a direct government insurance program.’”
The letter also explains that small- and medium-sized insurers would undoubtedly face significant challenges from an NBCR requirement, since they would probably have to assume a risk and an operational exposure of great danger and complexity for which they have no previous insuring or claim adjustment experience. Operational issues such as the accuracy of catastrophe loss models for property and liability terrorism risk, regulatory controls on insurer pricing, and issues arising from possible mixed attacks involving both NBCR and non-NBCR exposures have not yet been addressed. The letter calls for careful study and analysis by a commission, rather than a “premature and counterproductive mandate to provide NBCR coverage now.”
Posted: Wednesday, May 23, 2007 12:00:00 AM. Modified: Friday, June 08, 2007 12:45:34 PM.
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