Here we are, five years after hijackers took down the World Trade Center, and our country still hasn't committed to any long-term strategy for making sure the economy in general--and the insurance industry in particular--can handle terrorism exposures.

The clock is ticking, with the Terrorism Risk Insurance Extension Act due to expire next year. Critics keep ignorantly dismissing TRIA's federal security blanket as a bailout, forcing the industry to depend on the likes of Sen. Hillary Clinton, D-N.Y., for support.

However, at least with terrorism, we have a temporary system in place. Not so with natural disasters. Just over a year after Hurricane Katrina, we are not even close to a consensus on how to respond from an insurance standpoint.

The biggest problem is that while the industry is united on extending TRIA, insurers are badly split on how to handle Mother Nature's threats. The debate is devolving into a shouting match.

On one side is ProtectingAmerica.org--backed by Allstate--which wants a federal-state system of funds to backstop insurers after catastrophes. The group received a badly needed boost by convincing the Property Casualty Insurers Association of America--led by Ernie Csiszar, former NAIC president--to join their quest.

Others adamantly oppose such a scheme, including Liberty Mutual--which happens to be one of PCI's largest members.

The most outspoken critic thus far has been the American Insurance Association, whose senior vice president for public affairs, Julie Rochman, said: "We must move away from a post-disaster 'spread the risk to everyone across the country' mentality, to a system that honestly reflects the higher risks and costs of coastal development."

AIA put forth its own proposal, including risk-based pricing, stricter (and more strongly enforced) building codes, inclusion of hurricane risk in land-use planning, creation of tax-advantaged Catastrophe Savings Accounts, and matching government loss control grants.

ProtectingAmerica.org promptly hammered AIA, contending the group had "cobbled a catastrophe response plan that is inadequate, incomplete and insufficient. By failing to include a privately financed catastrophe fund, the AIA plan endorses the risky status quo and depends upon a system of year-to-year reinsurance contracts at ever-escalating prices with no lasting or accumulated protection for homeowners."

AIA President Marc Racicot then bashed "political thinking that would have us believe there is an easy way to address these complex issues. Our agenda is based upon proven principles, such as loss prevention and risk-based pricing."

What's tragic is that the opposing positions are not mutually exclusive. While AIA and Liberty Mutual are correct to push for premiums that reflect the risks insurers take in stormy regions, as well as to demand better loss mitigation efforts, are disaster funds such a bad idea in addition to these other steps?

If opponents to Allstate and company don't want to see such risks better spread, what is their alternative, given the chronic shortage of capacity in cat-prone regions? Also, can't the same argument opponents make against a cat fund hold true for TRIA, as skeptics claim terrorism only threatens major cities, such as New York?

I am not prepared to endorse creation of a national disaster fund, but I don't want to see the idea shouted down this early in the debate.

Congress can't stand insurance, and they won't budge on any related issue if the industry is split. That leaves us with the status quo, which is unacceptable. It's time to stop yelling at one another and start talking about an acceptable compromise package Congress can pass.

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