Federal Reserve Board Chairman Alan Greenspan today gave measured support to extension of the Terrorism Risk Insurance Act.[@@]
An extension of TRIA is needed because the risk of losses from terror attacks is too great for private insurance markets to handle, Greenspan told lawmakers at a hearing of the U.S. House Financial Services Committee on the state of the economy.
“I think that what Congress has got to do is to recognize it’s a trade-off,” Greenspan said. “That is, so long as we have terrorism that has the capability of a very substantial scope of damage, there is no way you can expect (the) private insurance system to handle that.”
Congress must renew TRIA despite the problems often associated with offering government support to private enterprises, Greenspan said.
“We have to be careful in creating whatever we do in government insurance or reinsurance to make certain we do not go beyond the point which is necessary, because obviously everybody likes free goods,” Greenspan said. “But I don’t see how we can avoid the issue of a significant segment of government-backed reinsurance in this particular area.”
In related news:
- The Financial Services Committee’s capital markets subcommittee has scheduled a TRIA hearing for July 27. The witness list could include industry executives and at least 1 state insurance commissioner.
- The Financial Services Committee schedule suggests that introduction of the State Modernization and Regulatory Transparency Act may be delayed until Congress returns to work after Labor Day. “Action on TRIA is paramount,” says one insurance industry lobbyist. “The energy needed to deal with work on the extension is squeezing the oxygen out of action on SMART.”