New York's top financial-services regulator says, based on his perspective as a former prosecutor of terrorism, the Terrorism Risk Insurance Act should be made permanent to respond to unconventional threats.
Benjamin Lawsky, superintendent of the New York Department of Financial Services, said at a meeting of the Federal Advisory Committee on Insurance (FACI), held Wednesday, that while the U.S. has made progress in dealing with conventional terrorism, "unconventional terrorism by its very nature is always going to be with us."
So why, Lawsky said, "aren't we talking about re-upping TRIA in a permanent way?"
He said that, as a former terrorism prosecutor, "I am saying it is something that we are going to live with forever—if industry isn't evolving for that risk, why aren't we joining other countries which don't have to go through this [perennial] debate?"
He added, "From New York's perspective, let's just do this once and be done with it."
Meanwhile, Michael McRaith, the director of the Federal Insurance Office, pointed to the potential impact on workers' compensation availability should TRIA be allowed to expire.
Marsh & McLennan officials told McRaith that, in the event TRIA is not reauthorized, carriers will just stop offering the coverage to employers, and also that these insurers will leave the assigned risk pools if there is no limit on exposure.
McRaith is charged with writing a report required of the President's Working Group (PWG) on Financial Markets on the availability and affordability of terrorism-risk insurance. The report is due this year. He asked at the meeting that FACI members provide him with data he could use to justify a continued government presence in terrorism-risk reinsurance.
Marsh presented a report to McRaith showing that the percentage of companies buying property terrorism insurance has been in the high-50-percent to low-60-percent range since 2009. The report says the Northeast has the highest take-up rates—in the mid 70 percent range—and take-up rates are increasing in the West.
FACI Chair Brian Duppereault, who recently resigned as Marsh CEO, told McRaith, "I testified several years ago (on TRIA renewal) and I think nothing has changed- since then; we should not throw out one of the few federal programs that works."
Sean McGovern, director and general counsel of Lloyd's North America, said, "I don't believe philosophically that governments should be involved in insurance, but practically, with terrorism, that is the world we live in, and it is offered as a backstop in other countries—and the U.S. government should be involved."
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