But, speakers noted that insurers are they're hurting from unreplenished losses incurred on Sept. 11, 2001. Panelists also worried about what would occur when the Terrorism Risk and Insurance Act expiration date arrives Dec. 31, 2005.

"Terrorism is a long-term risk. The current TRIA is short-term," said Robert G. Purdy, an executive vice president with American International Group's American Home Assurance Company in Philadelphia, Pa.

TRIA's "objectives have not been accomplished or realized," he said, stressing the need for the government backstop of TRIA to be extended.

He said there has been some discussion about an industry pooling arrangement when TRIA expires. However, he concluded, "There is not nearly enough private capital available in the insurance industry" to replace the $100 billion federal backstop.

Noting that the threat of attack is part of life today, he explained that any insured with losses due to terrorism would be paid from insurers' capital and not from loss reserves.

"Nobody has a potential terrorism catastrophe reserve set up to fund" losses, he said. "Nor can they set one up under existing accounting and tax rules. So the potential loss from an attack has not been pre-funded."

Indeed, he added, "The loss from 9-11 [2001] has not even been recouped yet and may never be."

TRIA, he noted, has contributed no capital to the insurance industry and will only respond to future losses.

Mr. Purdy said that without a master backup plan from a source beyond the insurance industry, "terrorism risks arising from potential use of nuclear weapons or other weapons of mass destruction are not insurable."

"In a most direct, literal sense, the industry will not be able to pay."

Yet, he continued, injury by terrorist attack, including nuclear attack and war, is not excluded from any workers' compensation policy.

He also said that while TRIA succeeds in backing solvency of the insurance industry, it does not guarantee the solvency of any particular carrier.

The conference, which centered mainly on topics related to workers' comp, is a partnership between The Florida Workers' Compensation Institute Inc. and The National Underwriter Company.

Leading off the discussion on terror risks, Robert Hartwig, senior vice president and chief economist with the Insurance Information Institute in New York, noted that only a year ago it was believed that the Terrorism Risk and Insurance Act "would never come to pass."

The bill, signed last Nov. 26 by President George W. Bush, is not, he said, the "simple pooling arrangement" that had originally been proposed, which exists in other countries such as the United Kingdom. In contrast, TRIA increases industry deductibles over a period of time, he said. Also, reinsurance is required and TRIA caps the federal government's liability, he said.

Other limitations associated with TRIA include the fact that personal lines insurers, reinsurers and life insurers are not eligible under the program, he noted.

But the biggest limit of all, he said, is the fact that the bill expires on Dec. 31, 2005. "Any policy written on 1-1-2005 or later will expire in 2006," he said, suggesting that 2004 is "the year in which you want to handle issues associated with renewal."

While terrorism coverage is mandatory for workers' compensation, "in the property area, the take-up rate for terrorism is only about 20 percent." He noted that insurers are still struggling to quantify terrorism.

Insurers' first challenge with TRIA was implementation and compliance, "an enormous job," he said. "There are 6 million businesses in the United States, each one of those having multiple policies subject to TRIA."

In order to comply with TRIA, insurers had 90 days to send "tens of millions" of notices to policyholders asking for acceptance or rejection of certain terms of coverage after the initial 90-day period, he noted.

Immediately after the 90-day period, he said, the first renewal season for terrorism began. This was "an enormous IT challenge for insurers, and an enormous personnel management issue," he said.

The common misconception about
TRIA, he emphasized, was that it got insurers off the hook.

The term "bailout" was "inappropriately used by some critics of the industry," he said. Mr. Hartwig added that insurers kept "enormous retentions, which increase each year."