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PIA Commends U.S. Treasury for Extending TRIA Provision, Says Congress Must Now Extend the Terrorism Act

WASHINGTON, June 21, 2004 - The National Association of Professional Insurance Agents (PIA) today praised the decision by the U.S. Treasury Department to...
June 21, 2004

Commends State Insurance Commissioners for Supporting TRIA Extension

WASHINGTON, June 21, 2004  - The National Association of Professional Insurance Agents (PIA) today praised the decision by the U.S. Treasury Department to extend the "make available" provisions of the Terrorism Risk Insurance Act of 2002 (TRIA) through 2005. At the same time, the association reaffirmed its support of ongoing efforts to get Congress to approve a two-year extension of TRIA.

"PIA commends Treasury Secretary Snow for making the decision to extend the 'make available' provision in a timely fashion," said Len Brevik, PIA National executive vice president and CEO. "While extension of the provision is important, it is the just first step. Now, Congress must make an equally clear commitment to continue TRIA, as well. One cannot succeed without the other."

The "make available" provision in TRIA requires that each insurer must make available, in all of its commercial property and casualty insurance policies, coverage for losses due to covered acts of terrorism that does not differ materially from the terms, amounts and other coverage limitations applicable to losses arising from events other than acts of terrorism.

PIA continues to support and participate in ongoing efforts by the insurance industry to secure Congressional extension of TRIA for a period of two years beyond its scheduled expiration on December 31, 2005. PIA also joined with its industry colleagues in signing joint letters and filing its own accompanying comments with the U.S. Treasury Department detailing market capacity reports from PIA members in the small-to-midsize commercial market, advocating extension of the "make available" provision, as well as TRIA itself.

Congress passed the Terrorism Risk Insurance Act of 2002 (TRIA) to ensure that the nation could recover from the financial devastation caused by terrorist attacks.  The risk of such attacks - and the need for TRIA's financial backstop - remain very real.

"When Congress enacted this law, memories of the terrorist attacks of September 11, 2001 were fresh in everybody's minds," Brevik said. "As we all know, the threat of another attack has not diminished. That is why it is vital to continue this crucial financial backstop, which can kick in if something happens again. We may not like to think about it, but we must remain prepared."

"TRIA is a backstop, not a bailout," said PIA National Senior Vice President Patricia A. Borowski. "It has allowed insurers and insurance buyers to manage terrorism risks effectively. While we had hoped the Treasury Department would recommend extension of TRIA together with the 'make available' provision, we commend the National Association of Insurance Commissioners for their support of a continued federal backstop."

PIA lobbied aggressively in 2002 as part of a broad industry coalition for enactment of the legislation, which was passed by Congress and signed by the president in November 2002.

Policyholders and insurers are already beginning to negotiate terms, prices and provisions for policy contracts that will renew beginning in January 2005 and extend into 2006.  Unless TRIA is extended in 2004, policyholders whose coverage extends into 2006 and their insurers will not know whether TRIA's financial backstop will exist for the full term of their coverage.  This will make it difficult, if not impossible, to accurately price such coverage and is likely to dramatically reduce the availability of terrorism insurance to business consumers. Such an outcome can only harm the economic recovery already underway.

"In survey results from our members, they have seen a slight increase in the number of insureds opting into TRIA coverage," Borowski said. "This is even more so the case in commercial property insurance, as lenders do a more thorough job of reviewing commercial property loan portfolios, making clear to mortgagees that they are required to opt-in for TRIA coverage.  However, as yet no carrier in our market segments across the country has come forward with a non-TRIA voluntary terrorism coverage product. That is a clear indication that insurers do not have the financial means to reserve for such an offered coverage while still offering insurance coverage for all other critical lines, underscoring the need for TRIA's continuance."

Founded in 1931, PIA is a national trade association that represents member insurance agents and their employees who sell and service all kinds of insurance, but specialize in coverage of automobiles, homes and businesses.