You would think that renewing federal reinsurance protection for terrorism risks in the short term, and establishing a permanent backup facility of some sort for the long run, would be a no-brainer, given the potential severity and lack of predictability of the exposure involved. But then again, there is so little common sense, guts or political will in Washington these days that it's no surprise Uncle Sam is again considering leaving the insurance industry in the lurch on this horrific risk once the Terrorism Risk Insurance Act expires at the end of next year.
The last week of September was consumed with reports, hearings and press conferences about whether the feds need to keep providing some sort of reinsurance backstop. I've never heard so much debate about an open-and-shut question. The country needs federal insurance protection in the "war" on terrorism, period!
As expected, the report on terrorism coverage by the President's Working Group on Financial Markets basically indicated that TRIA was never meant to be permanent and the private market should be able to handle such risks on its own. That's about as untenable as White House contentions that the war in Iraq has not worsened the risk of us facing another terrorism attack!
The Government Accountability Office also weighed in, but their myopic report indicated federal terrorism reinsurance should perhaps be limited to nuclear, biological, chemical and radiological attacks--as if a plane flying into a major commercial building, killing and injuring thousands, is just a routine exposure.
Washington is clueless about the risk of terrorism. Lawmakers dilly-dally about securing our ports, nuclear plants, water supplies and transportation hubs. They hand out homeland security grants like political pork, rather than based on sound risk management considerations.
When it comes to terrorism, the two houses of Congress and the White House make the three monkeys of see no evil, hear no evil and speak no evil infamy seem like the Three Wise Men by comparison!
I have no doubt no matter who says what about terrorism exposures, this debate will go down to the wire again next year, with a lot depending on who is running Congress.
It is incredible to say this, but the best-case scenario for the insurance industry--at least as far as terrorism goes--might be that Democrats take over the Senate and name Hillary Clinton majority leader. At least she recognizes that a lack of terrorism insurance would be a national security threat.
All those Republicans who self-righteously insist the American people can only trust them to defend us against the terrorist menace should stop their political posturing and actually do something to defend the economic security of the United States, by putting in place a permanent terrorism reinsurance facility.
The industry has floated a number of alternatives--including a U.K.-style Pool Re-type facility--that make a lot of sense. But for now, I'll take a straight renewal of TRIA as is, before it's too late.
On a side note, when I posted similar musings on my blog, one reader was "offended" by my use of quote marks around the "war" on terrorism. I only meant to point out how the White House wants it both ways.
On one hand, we are at "war" with terrorists. But if that is indeed the case, shouldn't all Sept. 11 claims outside of workers' compensation have been denied under the standard war risk exclusion? And isn't the debate over TRIA moot, since all such future losses should be excluded?
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