Although President George W. Bush's representative made it clear today that he does not want to see the federal reinsurance backstop provided by the expiring Terrorism Risk Insurance Act extended for a decade, let alone made permanent, I say he wouldn't dare veto a long-term extension bill if push came to shove.
As reported by our own Dave Postal (click here for his article about the bill's introduction, and here for industry reaction), David Nason, assistant secretary of the Treasury for financial institutions, told a House subcommittee that it is important that the [TRIA] program remain temporary and short-term,” emphasizing that “from both a market and economic perspective, it would be better to have no TRIA than a bad TRIA.”
He's got to kidding, right? Support for the House TRIA bill–H.R. 2761–is certainly not unanimous (we'll deal with the objections over mandatory coverage for nuclear, chemical, biological and radiological attacks on Monday), but no one in the insurance industry or the corporate buyer community objects to keeping TRIA's backstop around as long as possible.
It's pretty clear by now that while TRIA forces the private sector to absorb an enormous financial loss in any conventional terrorist attack, insurers and their reinsurers are in no position to cover the full impact of all such events–particularly NCBR–and never will be. President Bush would be delusional to think otherwise.
In fact, I don't think TRIA goes far enough to insulate the private sector from such losses. As I have said in the past, if we are indeed in a “War On Terrorism,” such attacks are clearly war-related risks, and should be excluded from coverage altogether. Let's put together a federal terrorism pool and mandate coverage if we are really serious about doing this right.
The White House also opposes any expansion of the program, meaning that proposed coverage for NCBR risks as well as for domestic terrorist attacks (those perpetrated by domestic agents, such as the Oklahoma City bombers) would not be backed by the President.
But for the moment, let's focus on the President's problems with the idea of a long-term TRIA facility. I would rather see the program made permanent, but 10 years is a good start. President Bush would rather see, what? Another one- or two-year extension, so we have to rehash these same arguments all over again, while leaving insurers and their clients in suspense on whether terrorism coverage will be available?
Would President Bush really allow TRIA to expire, then risk a terrorist strike on Jan. 2, 2008, leaving millions uninsured? In that case, as with natural disasters such as Hurricane Katrina, wouldn't the federal government have to come up with tens of billions in aid anyway? It makes so much more sense to have a program in place to handle this awesome risk.
If President Bush is as short-sighted as he usually is, and refuses to sign a long-term extension, I suppose we could get by with a two-year reprieve and deal with the next White House occupant, who hopefully would have a more realistic grasp of the overwhelming nature of this horrific exposure.
What do you all think?
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