U.S. regulators want to see stability before TRIA disappears

The U.S. National Association of Insurance Commissioners (NAIC) fears that as the end of the Terrorism Risk Insurance Act (TRIA) nears, the market may face severe instability.In a letter to House Financial Services Committee chair Michael Oxley and Senate Banking Committee chair Richard Selby, the NAIC states its concern that “significant market disruption may develolp before TRIA’s expiration (set for December 31, 2005). This is because insurers and commercial buyers must make policy decisions in 2004 on coverage extending into 2006.The U.S. Treasury is expected to deliver its report to Congress on the state of the terrorism risk market in June, 2005, but NAIC wants to see guidance before this time. Uncertainty brings “the likelihood of the widespread introduction of conditional exclusions for terrorism coverage, which could cause market disruptions and damage to economic growth or overall business confidence”.Brokers congratulated regulators for their action, with the Council of Insurance Agents and Brokers (CIAB) noting, “It is critical for the insurance industry and for the U.S. economy that Congress keeps a federal backstop in place until a stable market for terrorism coverage is established.”The CIAB conducted a recent study in which 80% of its respondents said TRIA should be extended past 2005.