The American Insurance Association (AIA) will highlight the importance of renewing the Terrorism Risk Insurance Act (TRIA) at the National Association of Insurance Commissioners' (NAIC) 2013 Fall National Meeting, underscoring TRIA's role in the workers' compensation marketplace. The NAIC meeting will take place December 14-18 in Washington, D.C.
"Workers' compensation insurers are particularly affected by a terrorist attack," said J. Stephen ("Stef") Zielezienski, AIA senior vice president and general counsel. "By definition, workers' compensation policies must cover all risks, including terrorism, because workers' compensation covers all injuries and deaths that are deemed under a state's law as work-related without distinguishing the source of the injury." Coupled with the nature of a terrorist attack, this makes the risk difficult to manage without the partnership provided by TRIA."
Zielezienski will appear before the Workers' Compensation (C) Task Force on Tuesday, December 17. In his presentation, Zielezienski will focus on the expected impact on employers, insurers and state regulators should TRIA sunset at the end of 2014.
"Without TRIA, workers' compensation insurers would have to make difficult decisions on how to manage their aggregated exposure, particularly for geographically-concentrated risks like terrorism," said Zielezienski. "If an insurance company elects to reduce their exposure by not offering as much capacity, then state residual markets and workers' compensation pools would have to absorb the risk. Ultimately, workers' compensation insurers would be responsible for these losses because they reinsure these residual market risks, but the extreme losses from catastrophic terrorism could stress the private markets and create economic uncertainty."
Zielezienski will also focus on what responsibilities state governments might assume for workers' compensation should TRIA not be reauthorized. Both AIA and the NAIC are advocating for the long-term reauthorization of TRIA. The NAIC passed a resolution at its 2013 Summer National Meeting in Indianapolis urging Congress to reauthorize the successful program.