HARTFORD, Conn., Sept. 27 /PRNewswire-FirstCall/ -- The Hartford Financial Services Group, Inc. (NYSE: HIG - News ) announced that its chairman, president and chief executive officer, Ramani Ayer, testified today at a U.S. House of Representatives hearing on terrorism entitled, "Protecting Americans from Catastrophic Terrorism Risk."
The hearing was part of Congress' ongoing evaluation of its Terrorism Risk Insurance Program and the statutes which support the program, known as The Terrorism Risk Insurance Act of 2002 (TRIA) and the Terrorism Risk Insurance Extension Act of 2005 (TRIEA), which extends TRIA, in modified form, through December 31, 2007.
Ayer testified before members of the Committee on Financial Services subcommittees on Capital Markets, Insurance and Government Sponsored Enterprises, as well as Oversight and Investigations. He described to lawmakers the many difficulties faced by insurance companies in managing terrorism risk and why it is vital for the federal government to remain a partner with the private market, as well as with insurance policyholders.
"One characteristic that makes terrorism unique is that it is a public risk," noted Ayer. "Our government's leaders and leading terrorism experts have described it as the 21st century's version of war. Terrorist attacks are explicitly designed to threaten our national security. They target the entire country and our government, no matter where they occur or who they harm or kill."
Ayer noted that the magnitude of attacks using nuclear, biological chemical or radiological weapons (NBCR) make this a public risk that can affect the entire insurance industry, and ultimately the economy. "A terrorist attack employing a suitcase nuclear device in an urban area will far exceed the private insurance market's capacity to manage it."
A May 2006 report published by the American Academy of Actuaries estimated that large nuclear attacks could trigger approximately $778 billion in total insured losses in New York City, $200 billion in Washington D.C. and $171 billion in San Francisco. According to that same report, even a medium NBCR event could generate insured losses of $446 billion, $106 billion, and $92 billion in those cities, respectively.
Another point raised by Ayer was that terrorism also fails each of the prerequisites of being insurable. "Private insurance works properly only when insurers have the ability to effectively pool the loss experience of policyholders exposed to relatively homogeneous, random and independent risks, and where the underlying sources of risk are well understood and, therefore, appropriately priced."
He also noted that managing terrorism risk successfully requires a public-private partnership, and in the end, the nation must find a long-term solution.
"The inescapable conclusion is that as long as this terrible risk threatens our way of life, we need to have a way to fortify our economy against it. The insurance industry is willing to play an integral role to finance this risk, working together with policyholders and the government, but we cannot do it alone."
Lawmakers passed TRIA after the September 11 attacks to help manage the risk of terrorism on U.S. soil. Under the law, the federal government partners with the insurance industry, serving as an insurer of last resort to protect against catastrophic terror attacks that could undermine confidence in the American economy.
TRIA was originally set to expire on December 31, 2005. Just prior to that deadline, and after months of negotiation, Congress passed TRIEA which will expire at the end 2007.
Now, many most closely involved in the issue, including the insurance industry, are working to find a solution that will take this public-private partnership beyond 2007. Yesterday, the Government Accounting Office (GAO) released a report which confirmed that NBCR risks are uninsurable in the private insurance market because of the potential for virtually infinite risk of loss, and because of the horribly unique characteristics of such attacks.
To view the complete transcript of Ayer's written testimony, please visit The Hartford's website at http://www.thehartford.com/press or contact The Hartford's media relations department at 860-547-3397.
The Hartford, a Fortune 100 company, is one of the nation's largest financial services and insurance companies, with 2005 revenues of $27.1 billion. The Hartford is a leading provider of investment products, life insurance and group benefits; automobile and homeowners products; and business property and casualty insurance. International operations are located in Japan, Brazil and the United Kingdom. The Hartford's Internet address is http://www.thehartford.com .
Some of the statements in this release should be considered forward- looking statements as defined in the Private Securities Litigation Reform Act of 1995. These include statements about our future results of operations. We caution investors that these forward-looking statements are not guarantees of future performance, and actual results may differ materially. Investors should consider the important risks and uncertainties that may cause actual results to differ. These important risks and uncertainties include, without limitation, those discussed in our Quarterly Reports on Form 10-Q, our 2005 Annual Report on Form 10-K and the other filings we make with the Securities and Exchange Commission. We assume no obligation to update this release, which speaks as of the date issued.
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