NU Online News Service, Oct. 19, 3:30 p.m. EDT

The Property Casualty Insurers Association of America is voicing concern to the Treasury Department that its plan for making payments to and getting funds from insurers following a terrorism incident incorporates a "one-size-fits-all" approach that may not work in the real world.

PCI is also asking Treasury to rethink how it deals with "long-tail" claims, with PCI suggesting that a perception that all claims could be resolved within 10 years may be too optimistic.

The PCI comments are in response to a Treasury request for comments on how it would reimburse insurers for a loss from a terrorism attack and, conversely, collect funds it is due under the law, the Terrorism Risk Insurance Act. The comment period closed Oct. 4. Treasury received 11 comments on the proposal.

In suggesting changes, PCI said, "We are concerned that Treasury is in some ways attempting to create a 'one size fits all' procedure that may not be appropriate for all insurers in every circumstance."

The PCI letter was signed by David Golden, PCI senior director of commercial lines.

In the letter, Mr. Golden said: "In crafting the final netting rule, great care must be taken to ensure that the TRIA program responds equally well for the small insurer with risks heavily concentrated in the area of a terrorism incident, the midsize insurer with a concentration of business in the affected area, and the large insurer exposed through many national account customers with locations in the area attacked."

He added, "TRIA must also work as well for general liability and workers' compensation as it does for property coverage."

Regarding "long tails," the PCI letter notes that the proposed rule sets no fixed time period for which a program year will be left open before a final netting date is established, but that Treasury indicates it would likely be five-to-seven years following a qualifying terrorism incident, with a likely maximum of 10 years.

"PCI supports Treasury's proposal that the final rule should set no fixed time period for which a program year should be left open," Mr. Golden said in the letter.

However, he cautioned that Treasury's projection of a likely maximum of 10 years "may not always be sufficient."

"While property claims may lend themselves to closing in the five-to-10-year time frame…liability and workers' compensation claims may take longer, perhaps exceeding 15 years in some circumstances," the letter states.

"As claims related to the September 11, 2001 attack have shown, it can take a long time for latent disease and delayed manifestation injuries claims to arise," Mr. Golden said.

He said in the letter that Treasury should be prepared to allow adequate time for the closing of program years for all lines of coverage implicated in a particular act of terrorism.