Rep. Hensarling debates merits of TRIA at hearing

Representative Jeb Hensarling (R-Texas) debated the necessity of the Terrorism Risk Insurance Act of 2002 on Thursday during a House Financial Services Committee hearing in Washington.

During the opening statement to the hearing, Hensarling, the committee chairman, said the original purpose of the TRIA was the creation of a temporary industry risk spreading program for foreign acts of terrorism and the facilitation of a transition to a viable maker for the insurance of private terrorism risk. Hensarling said that the quadrupling of the length of the TRIA is not helping the transition to terrorism risk insurance.

"So we all must recognize that in just five years TRIA has leapt in scope and quadrupled in length, neither of which I think could be mistaken for facilitating a transition to a viable market for private terrorism risk insurance," Hensarling said.

Hensarling asked if the TRIA was actually an insurance program, given that the program does not collect premiums. He also asked if the 11 years the TRIA was in place helped the insurance industry to successfully model and provide products for terrorism coverage or if the temporary measure hurt that development.

"Has not the capacity and the stand-alone terrorism insurance program increased significantly since 9/11?" Hensarling said. "We all agree the risks of terrorism are unique, but are they so unique as to be uniquely uninsurable?"

Hensarling said unique phenomena such as data losses, criminal riots, power outages, oil spills and airlines crashes were eventually modeled and assessed by the insurance industry. He asked if the U.S. posits that private insurance companies are unable to model the risk of terrorism, why would it assume that the federal government would be any better at the task. He cited the issues the government is having with the National Flood Insurance Program.

"As we look at the national debt clock, which I know is inconvenient to some, it principally turns because insurance programs -- be they social insurance programs such as Social Security and Medicare or others -- the government has not done a particularly good job," Hensarling said. "That ladies and gentlemen, represents a man-made disaster. And it will certainly color my opinion on this matter. I have an open mind. It is not an empty mind. It remains a skeptical mind."