TRIA is starting to get a lot of attention now, and it should. The protection provided by the Act is slated to end on December 31, 2005, and it will literally take an act of Congress to keep that from happening. Unless Congress does act, the renewal or replacement of workers compensation, property, and perhaps other insurance lines will likely be problematic throughout 2005 since their policy periods will extend beyond the period of protection provided by TRIA. You may even see some nonrenewal notices beginning this fall, so, now is the time to get your ducks in a row.

In dismissing TRIA as unnecessary, some people discuss the low take-up rate for optional TRIA coverage. However, the take up rate is much higher than the 20 to 30 percent that is mentioned because these statistics overlook the fact that not all TRIA coverage is optional. For example, everyone who buys workers compensation insurance is purchasing TRIA coverage. Additionally, in many parts of the country, insurers do not offer a terrorism coverage opt-out to their smaller commercial lines accounts. Instead, they merely include the coverage with everything else. Lastly, those insureds in the so called fire-following states are benefiting from TRIA even if they don’t buy the optional coverage.

The insurance industry seems to have given up on trying to develop its own solution to the problem. The major workers compensation insurers funded a feasibility study to determine if an industry pool would provide the needed capacity. When the study—conducted by Towers Perrin—showed that it wouldn't even come close to providing the needed capacity, the industry decided the federal government was the only option. The state insurance regulators seem to be onboard with this as well.

Frankly, until I read the Towers Perrin workers compensation pool feasibility study, I was very disappointed that the insurance industry had not accomplished more to prepare for January 1, 2005. Very little seems to have been done other than fund the workers compensation pool study, lobby for an extension of TRIA or an alternative solution, and develop contingency plans in case TRIA actually does go away (e.g., the recent ISO "Terrorism Conditional and Post TRIA" form filings and the development of aggregation management systems and underwriting processes).

However, I must admit that the workers compensation pool feasibility study helped me realize just how huge the problem is and how puny most industry-developed solutions would be in comparison to the exposure—at least initially. But I still can't help but wonder if "professional risk bearers" (i.e., insurers) can be more creative than they have been. If the government must be involved, it seems the industry could at least develop some proposals for a joint solution—perhaps a nonprofit pre-funding vehicle established by the industry with a federal backstop supporting it.

I don't know how we'll get there, but somewhere like this is probably where we will eventually end up. In the meantime, you are going to see a lot of lobbying and hand-wringing as insurers, risk managers, and others express their views in Washington. Unfortunately, it isn't a good time to expect Congress to act on something that has not yet become a crisis. It's all about politics from here to November, and with recent world events there is plenty of politics to be had. But Congress very well may have a crisis to deal with come January.

What do you think? Is TRIA necessary or critical to our industry and the economy? Has the industry done what it should to prepare for life without TRIA? Should the federal government reinstate TRIA or perhaps something else? Do you expect to start seeing nonrenewal notices this fall as insurers seek to reduce their aggregation risk? What are you doing to prepare for tougher workers compensation underwriting standards in a post-TRIA world? What else should risk managers, agents/brokers, or underwriters be doing now?

Another issue that has received a lot of attention lately is the revised approach to providing additional insured status for contractors and owners. The new endorsements are slated to go into use in July. We've been covering these developments in our subscription services (Contractual Risk Transfer and Commercial Liability Insurance). You may be pleased to learn that we are also working with Don Malecki to produce a new edition of our very popular The Additional Insured Book. It is nearly ready, and I'll first announce its availability here.

Thank you for the trust and confidence you place in IRMI.

All the best,

Jack

Jack P. Gibson
President
IRMI

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Treasury Department Requests Input for Its "Make Available" Determination

The "make available" provisions of TRIA require that, through December 31, 2004, each insurer must make available, in all of its commercial property and casualty insurance policies, coverage for insured losses under the Act. The secretary of the Treasury has the option of extending it through December 31, 2005, and is required under TRIA to make this determination by September 1, 2004.

The Treasury Department has requested comments regarding whether it should make this extension of the "make available" requirements for another year, and is accepting comments until June 6. "We hope that this broad request for public input on the 'make available' determination will facilitate the efforts of the Secretary to make a timely determination based upon a solid basis of information and views provided from all parts of the nation and from a wide variety of citizens, businesses, industry experts, and others," said Treasury Assistant Secretary Abernathy, who oversees the Terrorism Risk Insurance Program.

The request for comments and other information related to the Terrorism Risk Insurance Program can be found at the Treasury Dept. website.

New Expert Commentary

There are now 543 risk management and insurance articles on IRMI.com. Below you'll find summaries of some recent additions with links to the articles.

Additional Insured Changes in the CGL—Craig Stanovich discusses the new changes to the additional insured endorsements and the introduction of a limitation to the definition of "insured contract" characterized by ISO as coverage reductions.
Avoiding Willful Infringement in Intellectual Property Litigation—In this second of a 2-part article, Sanford Warren and Jack Richards II examine what constitutes an effective non-infringement opinion under patent law.
New Guidelines for Federal Workplace Drug Testing Proposed—The Department of Health and Human Services recently proposed new guidelines for federal workplace drug testing, including hair and sweat testing. Paul Siegel explains.
Business Interruption for Denial of Access Revisited—Doug Berry discusses three recent court cases addressing the denial of access due to a civil authority order and the effect of particular policy wording on business interruption coverage.
Managing the Environmental Risk from Subcontractors—Jeff Slivka and Mitch Cohen look at environmental risks posed by the many workers on the construction site and how to adequately manage these risks.
The Money Was No Longer Enough—What happens when a great salesperson decides to quit while on top for no apparent reason? Frank Lee explains how it could be Role Rejection Sales Call Reluctance.
Physicians: Frustrated and Fighting Back—Going on the offensive against disgruntled patients and their attorneys seems appealing, but Charles Kolodkin explains why risk management training is a better idea.

New IRMI Insights

Risk Managers Cautiously Optimistic in San Diego—At the recent RIMS conference, Jack Gibson concluded that, while optimistic about the current state of affairs in risk management, risk managers sense that things could easily take a turn for the worse at any time.

IRMI Construction Risk Conference

Arch Capital and Turner Corp. CEOs to Keynote Construction Risk Conference—Constantine Iordanou, president and chief executive officer of Arch Capital Group Ltd., and Thomas C. Leppert, chairman of the board and chief executive officer of The Turner Corporation, will be the featured keynote speakers at the 24th IRMI Construction Risk Conference. We are excited to have an opportunity to host such highly respected CEOs from the insurance and construction industries. They will discuss their views for the future and share their thoughts on what it takes to stay on the leading edge of construction risk management and insurance. The conference will be held in Orlando on November 8–11. Mark your calendar to reserve the dates.

IRMI Products & Services

New Edition of the Glossary of Insurance and Risk Management Terms—The ninth edition of IRMI's popular Glossary defines 2,800 key insurance and risk management terms in plain English with a focus on practical application. This popular reference gives you quick answers to questions involving unfamiliar terminology used in insurance specifications and proposals, risk management reports, and other written documents you receive. It also provides directories of important organizations and regulatory offices and contains more than 860 frequently used abbreviations and acronyms. More information.

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IRMI Update—Issue #89

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