The group acknowledged that capacity has increased somewhat for terrorism risk in the reinsurance market, and their comments were cited by the PWG as the source of their conclusions. However, RAA said in its statement that the amount of capacity that has come in does not come close to meeting the potential needs of the industry.

According to RAA, the total capacity for terrorism risk was $4-to-$6 billion prior to the extension of the TRIA program, with an additional $2 billion being added in 2006. "Technically there has been an increase, but far short of the industry deductible" of $36 billion, the group noted. "Reinsurance capacity has gone from zero to 'not very much' to 'not nearly enough.'"

Similarly, the RAA disputed the PWG's conclusion that some terrorism risk capacity may be emerging from capital market participants. No commitments have been made by the capital markets to assume any terrorism risk or finance a recovery, the RAA noted, and what capital has flowed into the reinsurance market has not been designated for terrorism risk.

"In late 2001 and early 2002, $11 billion of new reinsurance capital was added to global reinsurance markets. Since September 2005, $23 billion of new capacity has entered the (re)insurance market," the RAA noted. "Yet, none of this capital has gone to support terrorism risk. Instead, it has been allocated to natural catastrophe exposure and to replenish capital lost from 2001, 2004 and 2005 extreme events."

RAA did agree with the PWG in two key areas, however. The group supported the PWG's assertion that there is "great uncertainty in the models" for terrorism exposures, and also on the key issue of nuclear, biological, chemical and radiological exposure. The PWG concluded that the appetite for taking on NBCR risk is very low and that the potential for broad gains in the market for those risks "may be limited."

"The RAA supports the report's conclusion that there is a very limited reinsurance market" for NBCR, the group said.