Snow tells Senate panel that TRIA must change

Snow tells Senate panel that TRIA must change    U.S. Secretary of the Treasury John W. Snow told the Senate Committee on Banking during extended testimony Thursday that the Bush administration 'cannot support a straight extension' of the expiring Terrorism Risk Insurance Act (TRIA).
   In November, 2002, President Bush signed TRIA into law after losses from the Sept. 11, 2001 terrorist attacks 'led the insurance industry to reduce its exposure to future losses largely by excluding coverage of terrorism risk in many policies,' Senate explained to the Senate panel.
   Under TRIA, companies that provide commercial property and casualty insurance are required to make available terrorism coverage on the same terms and conditions as offered by their non-TRIA coverage.
   Since then, 'TRIA has allowed both insurers and policyholders to adjust to the post-Sept. 11 view of terrorism risk,' Snow said. The expiration of TRIA this fall 'will change the business environment in which insurers operate and will therefore change their behavior,' he predicted.
   'Experience with natural catastrophe risk underwriting and the assignment of agency ratings suggests that in order to avoid ratings downgrades, insurers may significantly alter their approach to terrorism risk insurance,' Snow said.
   'While the immediate effect ' is likely to be less terrorism insurance and higher prices, we expect that over time the private market will develop additional terrorism insurance capacity,' he explained.
      The administration, given the widespread nervousness about what would happen after TRIA expires, concedes that a reformed version of the act may be unavoidable.
'It is the administration's view that extension of the program should recognize its temporary nature, the rapid expansion of private market development (particularly for insurers and re-insurers to grow capacity, and the need to significantly reduce taxpayer exposure,' Snow said. The White House wants 'an increase to $500 million of the event size that triggers coverage,' he noted.
   'The events of the past week in London have been an unwelcome reminder that the risk of terrorism is real and that the war on terrorism will be waged over a long time,' Snow said. 'Some believe the fact that terrorism risk is real suggests the need for a permanent and obtrusive federal role in the market for terrorism risk insurance. I believe that the risk of terrorism is likely to remain a part of our lives for some time to come, but that is precisely why the federal government needs to encourage the development of the most creative and cost-effective means of covering terrorism risks.'