CFA Responds On Terrorism Bill

To The Editor:

Regarding your July 8 editorial, “Terrorism Bill Critics areWrong,” we offer the following points:

As a consumer group, we try to represent our constituents notonly as consumers but as taxpayers. The terror insurance bills muchtoo broadly and unnecessarily expose taxpayers to risk, even ininstances when private insurance has already been secured.

Insurance companies have sold a lot of terrorism coverage. Astand-alone terrorism market has developed, with capacity of about$1 billion. Prices have moderated hugely. These prices include theactuarial expectation that the insurer will pay 100 percent of theterrorism loss.

To come in now, as the U.S. Senate bill would do, with freereinsurance covering up to 90 percent of the claims is a windfallfor the insurers. Who could deny that?

Of course, the Risk and Insurance Management Society supportsthe bill. It represents large buyers of insurance who might havethe clout to get some of the premiums back when the risk is sharplycut when a federal bailout occurs (or, at least, negotiate bigreductions on renewal).

We would, I suppose, favor free reinsurance for auto and homeinsurance so we could try to get premiums down for beleagueredindividual insurance buyers. But we doubt the insurers would passthat savings through, either.

And a question: Why is it when you agree with a position we takeyou never call us “self appointed,” but always do when you want tooppose our stance? Who appointed you to label us in thisfashion?

J. Robert Hunter
Director of Insurance
Consumer Federation of America
Washington, D.C.

Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, July 29, 2002.Copyright 2002 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.