Extend the re-insurance safety net for God's sake!

■"Expand the Terror Insurance Safety Net," by William R. Berkley, Wall Street Journal, 20 September 2005, p. B2.

Congress passed the Terrorism Risk Insurance Act (TRIA) in 2002 in response to 9/11, in effect clearing up the whole "who insures the 're-insurers'?" question.

What question is that, you ask?

Insurance companies need insurance too, and they turned to far larger insurance brokers known as "reinsurers" who basically offer them insurance against high-end losses. It's like the back-up plan for the insurance industry.

Well, 9/11 spooked the reinsurance industry, which said, in effect, "We won't offer insurance to insurance companies over catastrophic terrorism or other, similar beyond-imagination disasters."

In turn, insurance companies were limiting the amount of property insurance they'd offer companies, which got to be a scary concept for big companies in big cities like NY and LA.

Thus, Congress stepped in and passed the TRIA in 2002, saying in effect, "We'll pick up anything beyond the fantastic figure of $30 billion paid out by the insurance industry." At that point the Fed is responsible for 90% of damages up to 100 billion.

Needed or not?

I say needed, for psych value alone. Of course, if anything went over $30 billion, you know the government would be picking up the rest of the bill. That's what it's for--the common weal and what not. Just making it explicit chilled the reinsurance industry and that chilled the insurance industry and that's something worthwhile all in itself. It also says to the rest of the world--meaning terrorists--that we have our shit together on this subject: You dream of financial meltdown? Well, we have some plans to counter your schemes.

The law runs out at the end of 2008. Congress is debating whether or not to deal with it. It should extend it, not for property damage per se, but for business continuity losses first and foremost. Keeping business up and running is everything. It's what Congress should be focusing on for America. It's what the White House should be focusing on for our economic ties with the outside world. And it's what all advanced nations and their national security establishments should be thinking about and planning for with regard to the global economy as a whole.

In a connected world, business continuity is everything. Look at New Orleans and ask yourself what will be the biggest horizontal scenarios coming out of that disaster: loss of business continuity will lead the pack in several industries. Resiliency, my friends, is the best defense. Congress should be promoting it by extending TRIA.