Posts Tagged ‘TRIA’

House votes to extend Terrorism Act … presidential veto expected

Thursday, September 20th, 2007

We have a fight brewing over the Terrorism Risk Insurance Revision and Extension Act (TRIEA), which the House just voted to extend for 15 years. We live in unusual times when the white knight for the insurance industry is Barney Frank and the opponent is George Bush.
The House measure not only extended the bill, but also strengthened it:

It would add group life insurance to the lines of insurance covered by the program, and it would cover terrorist attacks by Americans as well as by foreigners. It would also require commercial property and casualty insurance policies to cover losses from terrorist attacks involving nuclear, biological, chemical or radiological attacks. Typically such policies now exclude that coverage.

According to other news reports, it would also kick in at $50 million, rather than the current $100 million.
Many in the insurance industry think that such a measure is vital to ensure industry solvency in the event of large-scale terror, particularly in workers comp. In other lines of insurance, carriers can price for the coverage or can simply refuse to extend coverage, but because workers compensation is statutory, these mechanisms aren’t available.
This is likely to produce pushback from the White House – it’s anticipated that the president will veto the measure, viewing it as an unacceptable expansion to a program that was intended as temporary. The White House issued a statement saying that the most efficient method for providing terrorism coverage will come from the private sector. In response, bill sponsor Barney Frank said, “There are in our midst people who believe in the free market so firmly that they believe in it the way other people believe in unicorns.”
Get out the popcorn, this could be an interesting contest. It may be a nail-biter, too, since the current law is set to expire at the end of the year and workers comp is heading into its heavy renewal season.

News roundup: Cavalcade, immigrants, TRIA, NIOSH and more …

Tuesday, July 24th, 2007

Cavalcade – Catching up with news after being on vacation for a week, I find a good place to start is with last week’s Cavalcade of Risk, ably hosted by Richard Eskow of The Sentinel Effect.
Illegal immigrants and WC – Peter Rousmaniere of Working Immigrants posts about a review of workers compensation coverage of illegal workers that was compiled by the International Association of Industrial Accident Boards and Commissions (IAIABC). He notes that, “… 6 states have statutes that expressly authorize coverage for these workers – CA, FL, NV. NY,TX and UT, while two states’ laws expressly do not – ID and WY. Twelve states have had court decisions in favor of coverage – IL, MI, MN, ND, OH, AL, AZ, CO, MT, NC, SC and VA. Two of these states – MI and VA – also have court decisions going the other way. Two other states have had court decisions which go against coverage — KS and PA.”
NIOSH research programs saved – David Michaels of The Pump Handle reports that with the defeat of The Barton Amendment, National Institute for Occupational Safety and Health programs have been saved. The bill would have cut more than 20% of the NIOSH budget and would have effectively eliminated the National Occupational Research Agenda.
TRIA – Mark Hofmann of Business Insurance reports that the markup of the TRIA extension bill is expected this week. TRIA – a federal terrorism backstop due to expire Dec 31 – would extend for 10 years.
MN groups sue AIG – Roberto Ceniceros of Business Insurance reports that Minnesota workers comp groups are suing AIG seeking $100 million in damages. The Minnesota Workers’ Compensation Reinsurance Assn. and the Minnesota Workers’ Compensation Insurers Assn. state that the $1.2 million that was earmarked for Minnesota in the settlement AIG reached with Eliot Spitzer for AIG’s alleged underreporting of premiums over 22 years is insufficient. Ceniceros notes that they are not they only entity filing suit – the National Workers Compensation Reinsurance Pool, representing about 600 insurers, also filed suit in May.
Kudos – congratulations to Michael W. Fox of Jottings By An Employer’s Lawyer for his 5-year blogiversary – that’s a lot of blogging. Michael’s blog has long been one of our favorites – drop on by and see why.
Gasoline safety – over the summer there is an increased risk of gasoline-related injuries for workers because gas-powered equipment is prevalent in outdoor work sites. OSHA offers the following safety tips:

  • Wash any skin or clothing that comes in contact with gasoline thoroughly with soap.
  • Avoid inhaling gasoline fumes by keeping all gas in approved sealable safety containers.
  • Know initial symptoms of carbon monoxide poisoning, such as headache, fatigue, dizziness, drowsiness, nausea, and tightness across the chest.
  • Do not use gasoline for any purpose other than fueling a motor.

OSHA’s Gasoline Safety and Health Topics outlines standards for working safely with gasoline, including healthful exposure limits for employees. Also, to prevent carbon monoxide poisoning, see OSHA’s Carbon Monoxide Fact Sheet (PDF).

NCCI 2005 Issues Report – a look back, a look ahead

Wednesday, April 6th, 2005

Every spring, NCCI publishes a series of reports that paint a portrait of the workers compensation industry’s health. These include an annual “Issues Report,” followed later by a “State of the Line” report. For those of us who work in the industry, these reports offer a quick look of where we’ve been and provide a cookie trail for where we are likely headed. They are mandatory reading for industry insiders, but they are not just for insurance wonks. If there’s one drum we continually like to beat here at Workers Comp Insider, it’s that the more employers understand about the insurance industry, the better prepared they can be to weather any market vagaries.
The 2005 Issues Report has been released, and in his Annual Snapshot (PDF), executive director Stephen Klingel paints a good news/bad news scenario of a market in transition. Some of his observations include:
Insurer reserve deficiencies were reduced by approximately $5 billion dollars. Although improved, reserve deficiencies are still a problem. In workers comp, losses have the famous “long tail” – that is, they play out over years. Insurers set aside reserves for the estimated cost of the claim. If they don’t set aside adequate reserves, when it’s time to pay the piper, insurer insolvencies occur and havoc ensues. Insurer insolvencies still loom as a potential problem.
Medical costs – particularly prescription drug costs – are still galloping away. Wage replacement was always the largest share of lost time claim cost, but now medical costs represent 55% of the cost, on average. In some states – AL, AZ, IN, KY, TX, and WI – the cost approaches 70%.
Frequency continues to decline. That’s good news. It means that employers are doing a better job in the area of safety. NCCI reports “significant declines occurred in fatal, permanent total, and permanent partial claim frequency.” But on the flip side of the coin, severity is increasing. That means that the medical costs and/or the duration of claims are rising. Not so good.
Terrorism Risk Insurance Act (TRIA) uncertainty looms. The uncertainty about whether Congress will extend TRIA casts a pall over the industry. The clock is ticking, it is due to expire at the end of the year. TRIA provides a federal backstop or safety net for insurers in the event of any catastrophic events. Because workers comp is mandatory coverage, it is a line of insurance that is particularly exposed – insurers can’t exclude terrorism coverage when issuing policies.
The residual market is stabilizing. The residual market is sometimes called the assigned risk pool, or more familiarly, “the pool” or “the market of last resort,” while the rest of the market is known as the voluntary market. If you are an employer, you might get thrown in the pool for any of a number of reasons: your loss experience may be terrible or you may simply be in a high-risk industry. For one reason or another, no one wants to write your policy. NCCI reports that the residual market now represents about 13% of the total premiums, up from about 10.7% in 2003. However, the rate of growth for the residual market appears to be appears to be slowing.
NCCI

Congress considering Terrorism Risk Insurance Act (TRIA) renewal

Monday, September 27th, 2004

Business Insurance reports that the outlook for extending the Terrorism Risk Insurance Act (TRIA) looks positive. The bill was enacted to provide a $100 million federal backstop for insurers but it is set to expire at the end of next year. As we approach one of the primary policy renewal cycles, insurers are getting edgy about the idea of TRIA expiring.
Insurance Journal reports on testimony that the Council of Insurance agents & Brokers (CIAB) made before the Senate Banking Committee last week. Albert R. (Skip) Counselman, a former CIAB chairman and president and CEO of Riggs, Counselman, Michaels & Downes, Maryland’s largest independent brokerage firm, told the Senate that the private marketplace will not be prepared to take on the full risk posed by potentially catastrophic terrorism losses by the time the law expires on Dec. 31, 2005.
“Without the backstop, the economy could suffer significant damage as businesses pull back because the lack of insurance coverage makes them financially vulnerable.”
He noted that TRIA affects all parts of the country, and because of its enactment, the availability of terrorism coverage has grown, premium prices have dropped and nearly half of all insured are purchasing terror cover.
According to a study earlier this year by Marsh, Inc., the largest percentage of companies buying terrorism insurance were in the energy business, followed by the media, food and beverage, habitational/hospitality, health care and real estate industries.”

For more on this topic:
Terrorism Risk Insurance Act (TRIA) to expire
Terrorism risk and workers compensation
Workers Comp and Terror: The Long Shadow

Terrorism Risk Insurance Act (TRIA) to expire

Monday, June 7th, 2004

The three-year Terrorism Risk Insurance Act (TRIA) is set to expire December 31, 2005 unless Congress acts to extend it. This is of great concern to insurers who will soon be negotiating and writing business insurance policies for 2005 and beyond. Any policies that are written after 1/1/05 will not be fully protected by federal backstop insurance.

An industry coalition of concerned insurance parties is petitioning Congress to extend TRIA, stating that “Without a risk-spreading mechanism, the right attack could very well bring the insurance industry to its knees, and significantly destabilize our economic infrastructure.”

Although the original measure was intended to be a bridge, industry spokespeople are united in calling for an extension as being essential for the stability of the industry. The following were among the points made in Senate banking Committee testimony:

“The commercial property-casualty insurance sector continues to lack the financial capacity to handle catastrophic terrorism losses on its own. Certain plausible event scenarios estimate insured losses from another catastrophic terrorist attack on U.S. soil could exceed $250 billion, far exceeding the entire commercial property-casualty industry’s estimated capacity.

“Terrorism risk cannot be modeled or predicted. Because terrorism defies the normal underwriting and rating principles, that limits the ability of property-casualty insurers to advance a private mechanism for that risk. For example, the complex and deliberate nature of terrorism prevents insurers and policyholders from using loss control as an effective tool to minimize the risk.”

Backstop insurance is of particular concern in workers compensation. Workers comp is different from other types of insurance where events occur and they are paid for within a short amount of time. Workers comp claims have a long tail by their very nature, meaning that payment can extend over many years after the original event. Insurers must maintain reserves to cover the expected cost until the claim is closed.

With the September 11 event, workers comp insurance was on the line for the death benefits for workers killed in the attack; it is also the “exclusive remedy” for any workers who sustained injuries during the attack, or who were in the “course and scope” of employment during the extensive cleanup projects in the aftermath of the attack. Recently, we’ve seen alarming reports that the dust from the World Trade Center attacks is more toxic than originally estimated, and that the associated range of health problems may be severe. We may have only seen the tip of the iceberg in terms of survivor health problems. This is a dramatic example of the “long tail” claims that can be associated with workers comp.
For more on this topic:
Terrorism risk and workers compensation
Workers Comp and Terror: The Long Shadow