R Street says House terror insurance bill is short on reform
The legislation, which is expected to be taken up by the full House this week, would raise the level at which the $100 billion federal terrorism insurance backstop is triggered from current $100 million to $200 million, phased in over the course of the extension. Legislation approved by the House Financial Services Committee this summer could have raised the trigger for conventional terrorism attacks to $500 million.
In November 2013 testimony to Congress, R Street Institute Associate Fellow Ernst Csiszar, a former president of the National Association of Insurance Commissioners, said data from the market for industry loss warranties suggests the private market could absorb raising the trigger level to as high as $20 billion.
Created in 2002, TRIP would expire Dec. 31 if not extended by Congress.
“Given the burgeoning private market for terrorism insurance, this extension should have been an opportunity for real reforms that take risk off the backs of taxpayers,” R Street Senior Fellow R.J. Lehmann said. “We supported extending the program in a way that would continue to phase out the government’s role, rather an abrupt expiration that could have had unpredictable effects, particularly on workers’ compensation market. The reforms included in this bill do not go nearly far enough.”
In addition to a significantly higher trigger level, Lehmann argued that Congress should have heeded the call for deeper and broader reforms to the program, including phasing out coverage altogether for commercial liability insurance and charging insurers a premium for the reinsurance the government provides.
“In each of its two prior reauthorizations, Congress moved to shrink the terror insurance program and the market has responded by offering more private coverage at reasonable prices,” Lehmann said. “Leading into this expiration, we already were seeing reinsurers offering even more capacity, in some cases dropping exclusions for terrorism coverage altogether. It is a disappointment that lawmakers wouldn’t take advantage of those trends by moving more forcefully to reform TRIP and better protect taxpayers.”