Insurance commissioners should coordinate a long-term solution to the terrorism coverage problem to show that states can work together effectively on a national level, the Consumer Federation of America contends.

In a letter to the heads of the National Association of Insurance Commissioners and the National Conference of Insurance Legislators, CFA Insurance Director J. Robert Hunter said the two lawmaking groups have a “great opportunity to show leadership and to prove to Congress that it need not move to substitute federal insurance regulation for state insurance regulation.”

That opportunity, Mr. Hunter said, is the expiration of the Terrorism Risk Insurance Act in two years, on Dec. 31, 2007.

“As you know, it is extremely unlikely that Congress will extend TRIA again after 2007,” he wrote. “Now is the perfect time for the states to put a system in place that makes the end of TRIA a minor event.”

Mr. Hunter, an opponent of TRIA's extension, warned that “if NAIC, NCOIL and the states do not plan carefully and early, the potential for market upheaval is obviously much greater, not to mention unwarranted appeals by insurers for the last-minute renewal of TRIA.”

Time is of the essence, he added, for states to show they can take the lead in resolving the terrorism insurance issue.

The President's Working Group on Financial Markets is scheduled to release a report on the long-term availability and affordability of terrorism insurance by the end of September, and Mr. Hunter said states should act first to show they are on top of the issue.

“Waiting for the Working Group to report would cause the states to lose critical planning time,” said Mr. Hunter. “Moreover, such a lengthy delay would make NAIC, NCOIL and the states appear as if they are asleep at the switch in planning for such an important change.”

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