Letter to Senator Richard Shelby

September 8, 2004

The Honorable Richard Shelby
Chairman
United States Senate
Committee on Banking, Housing and Urban Affairs
Washington, D.C. 20510

Dear Mr. Chairman:

We are writing to urge that the Committee on Banking, Housing and Urban Affairs promptly consider S. 2764, legislation to extend the Terrorism Risk Insurance Act of 2002 (TRIA). We appreciate the May 18 hearing that you scheduled before the Committee. During that well-attended hearing the majority of the Senators present spoke in favor of the Act.

TRIA has been a critically important part of our nation's response to terrorism since the September 11th attacks. The Act, which enjoys bipartisan support, has helped restore a greater sense of economic security and stability, especially in those parts of the country that face the most serious threats of terrorism. Recent warnings by federal authorities, which led to a heightened state of security alert for financial centers in New York, Washington and Newark, N.J., are a reminder that those risks remain very real.

As you know, in the aftermath of the 2001 attacks, the market for terrorism insurance had all but completely evaporated. TRIA responded by establishing a mechanism to spread the risk of terrorism through a public-private partnership. As a result, affordable terrorism insurance is now available for businesses in nearly all sectors of our economy - transportation, energy, real estate, construction, travel and tourism, lodging, health care, financial institutions, public entities, manufacturing, and retail.

TRIA provides a backstop to the private commercial property-casualty insurance system, and enhances market certainty, by establishing a limit on terrorism-related losses that must be borne by private insurers. Under TRIA, insurers are required to offer terrorism coverage on commercial policies and to shoulder billions of dollars in terrorism-related risk that escalates annually. The federal government bears a share of the financial risk only after losses become catastrophic or could devastate a company or the industry as a whole.

Although TRIA is not set to expire until December 31, 2005, it is essential that Congress act quickly to extend the legislation in order to provide economic certainty to commercial insurers and policyholders, most of whom in the coming months will begin negotiating provisions, terms and prices for policies that will renew in January 2005 and extend into 2006.

If TRIA is not extended soon, commercial consumers may find it increasingly difficult to obtain terrorism insurance as insurers would be forced to evaluate each policy on the assumption that TRIA's backstop will cease for at least a portion of the coverage period. This could stifle economic activity and eventually shift more risks of terrorism to taxpayers and businesses.

We believe S. 2764, which would extend TRIA for an additional two years, is the best approach to addressing this problem.
The bill would help ensure the continued availability and affordability of terrorism insurance in the short-term. It also would give industry the time it needs to develop a long-term, market driven approach to mitigating the potential economic impact of future terrorist attacks.

Thank you for your consideration of our views, we look forward to working with to get this important piece of legislation through the committee.

Sincerely,

Sens. Corzine

Dodd

Bayh

Stabenow

Reed