Terrorism insurance requires 9 key principles

The Risk and Insurance Management Society, Inc. (RIMS) recently gave testimony advocating nine key principles necessary for the development of a long-term solution to terrorism. At the public hearing on terrorism insurance matters, held by the National Association of Insurance Commissioners’ (NAIC), one principle RIMS board member and director of external affairs Mike Fenlon noted was that the private market will not be adequate to cover acts of terrorism without TRIA. Fenlon explained that as a result the federal government must act as a reinsurer.Fenlon further explained that RIMS believes that a program should be proactive and not implemented ad hoc after an attack. In addition, he said that RIMS also supports a private/public partnership, such as some form of risk pooling. The Society, he said, recommends the program be inclusive of nuclear, biological, chemical, and radiological (NBCR) events caused by terrorism, as well as eliminate the distinction between “foreign” and “domestic” acts of terrorism. Financial incentives and eligibility for participation in the program should also be considered to encourage creation of private insurance capacity, Fenlon said on behalf of RIMS.RIMS will focus on a long-term solution for terrorism insurance availability until a sufficient resolution is reached.The hearing, which took place in New York City and was chaired by New York State Insurance Superintendent Howard Mills, included 21 speakers from various industry trade associations, insurance corporations, and membership groups. The purpose of the NAIC’s public hearing is to gather information helpful to insurance regulators responding to the Treasury Department’s request from the President’s Working Group on Financial Markets.