Terrorism Insurance Law Faces Opposition From Bush
The Bush administration is calling for a scaled-backed extension of a federal terrorism insurance program that is due to expire at the end of this year.
In a letter to Congress, Treasury secretary John Snow said the administration opposes an extension of the Terrorism Risk Insurance Act in its current form.
"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 innovation and capacity building," secretary Snow says in the letter that accompanies a study of the availability and outlook for private terror insurance.
The Coalition to Insure Against Terrorism blasted the Treasury study. "The study's assertion that the now-partial presence of reinsurers will somehow grow stronger in the absence of a federal backstop defies logic," the coalition said.
The coalition of financial and real estate interests along with business insurance policyholders pushed for enactment of a backstop federal reinsurance program following the Sept. 11, 2001 terrorist attacks.
"The Treasury study does not present an accurate picture of the current terrorism insurance marketplace and fails to acknowledge that the risk of terrorism is unknowable," CIAT said.
The Commercial Mortgage Securities Association said the availability of terrorism insurance is essential for the "continued vibrancy" of the commercial-mortgage backed securities market and commercial real estate investment.
"There is no more important issue to CMSA than an extension of TRIA in some form," CMSA president Margie Custis said.
Meanwhile, House and Senate banking committee chairmen welcomed the administration's conclusion that any TRIA extension needs to reduce the government's role in the insurance market.
Senate Banking Committee chairman Richard Shelby, R-Ala., contends that TRIA was "necessary to calm disruptions in the insurance markets" in the wake of the Sept. 11 terrorist attacks. "However, any extension of TRIA should be narrow, targeted and minimize interference with the markets," Sen. Shelby said.
House Financial Services Committee chairman Michael Oxley, R-Ohio, noted that the Treasury report shows that TRIA may be inhibiting development of a long-term private terrorism insurance market.
"Any revamped terrorism insurance program must encourage greater private sector involvement and must improve the marketplace. Any successful package must include full payback of claims, narrowed taxpayer exposure to insurance risk, narrowed federal involvement in order to allow development of the private market, and private sector layers of coverage," Rep. Oxley said.
The two chairmen pledged to work towards passage of a TRIA extension bill by the end of the year. Sen. Shelby has scheduled a committee hiring on TRIA this Thursday (July 14).
Secretary Snow listed several demands in his letter to Congress.
"The administration would accept an extension only if it includes a significant increase to $500 million of the event size that triggers cover, increases the dollar deductibles and percentage of co-payments," the June 30 letter says.
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