Bush Administration Weighs In On Federal Terrorism Reinsurance

"The report finds that TRIA has achieved its goals of supporting the industry during a transitional period and stabilizing the private insurance market," U.S. Treasury Secretary John Snow writes in a letter attached to the copy of the report that the Treasury Department sent to Rep. Michael Oxley, R-Ohio, chairman of the U.S. House Financial Services Committee.

The economy is far stronger today than it was in 2002, and "extending TRIA would have little impact on the economy given its current strength," Snow writes in the letter. "It is our view that continuation of the program in its current form is likely to hinder the further development of the insurance market by crowding out innovation and capacity building. Consistent with its original purpose as a temporary program scheduled to end on Dec. 31, 2005, and the need to encourage further development of the private market, the administration opposes extension of TRIA in its current form."

Any extension of the program should recognize the temporary nature of the program and the need to significantly reduce taxpayer exposure, Snow writes.

"The administration would accept an extension only if it includes a significant increase to $500 million of the event size that triggers coverage, increases the dollar deductibles and percentage co-payments, and eliminates from the program certain lines of insurance, such as commercial auto, general liability, and other smaller lines, that are far less subject to aggregation risks and should be left to the private market," Snow writes.

Snow also wants to limit the ability of plaintiffs to reap excessive profits from terrorist attacks.