INSURERS CLAIM MITIGATION EFFORTS DO NOT REPLACE THE NEED FOR TRIA:

Officials in the Department of Homeland Security have introduced a proposal to mitigate losses from a future terrorist attack by establishing corporate security standards, or “best practices,” that will help protect American businesses from terrorism. However, the Property Casualty Insurers Association of America claims that mitigation will not replace the need for renewing the Terrorism Risk Insurance Act, which is set to expire on Dec. 31, 2005. “Mitigation should be a part of any long-term private sector solution to managing terrorism risks,” said Carl Parks, senior vice president, federal government affairs for the PCI. “But reducing exposure to catastrophes by incorporating better risk mitigation techniques does not address the issue of financing the losses from these mega-catastrophes. That’s the important role that the Terrorism Risk Insurance Act plays and a component that must remain in place if we are serious about protecting Americans and the American economy from terrorist threats.” PCI said that its members are concerned that mandated loss control measures, such as those stated in the Department of Homeland Security’s proposal, could increase the cost of doing business, invite litigation, and fail to deliver any real benefits to business owners, workers, or consumers. The basic concept of the proposal would be to have the government or each industry develop a minimum set of security “best practices,” reported the Boston Globe. Insurance companies could then audit their business clients for compliance against the set standards, offering reduced premiums for compliance. The trade association of insurance companies continues to claim that a private market solution for terrorism coverage will not work without some level of federal involvement.