Fed Regulator Might Have Bolstered Terrorism Re Bill

Washington

The insurance industry would have had a much better chance of obtaining a federal backstop for losses caused by terrorism if the industry had a federal regulator, an industry analyst contends.

Peter Wallison, a resident fellow at the Washington-based American Enterprise Institute, said the effort to enact a federal terrorism reinsurance bill has been hampered by the absence of anyone within the federal government who is familiar with the insurance industry.

Speaking here at a legislative seminar sponsored by the New York-based Risk and Insurance Management Society, Mr. Wallison said the lack of a federal advocate for the insurance industry stands in sharp contrast to the banking and securities industries, which have federal regulators to explain their needs to federal lawmakers.

Since there is no one in the federal government to discuss industry needs with Congress, he said, Congress generally hears only from the industry itself, rather than from a federal official who is perceived as being neutral. Congress, he added, is naturally suspicious of pleas made by industry.

Meanwhile, the Senate is still struggling to develop a framework for bringing terrorism insurance legislation up for consideration. In a statement on the floor of the Senate, Sen. Harry Reid, D-Nev., a member of the Senate leadership, accused Republicans of blocking efforts to move a bill.

“The majority has been trying since December 2001 to reach agreement on bringing up legislation to deal with this growing problem,” he said. “Unfortunately, every time we try, we have been blocked from bringing this up by the minority.”

Sen. Reid said terrorism insurance legislation is becoming a growing concern because of the decision by Moodys Investor Service to place the ratings of 14 commercial mortgage-backed transactions on watch for a possible downgrade due to concerns about terrorism insurance coverage. “This issue is too important to be caught up in political agendas at this stage,” Sen. Reid said.

“There are some who seek to impose greater restrictions on insurance companies,” he said. “There are others who seek to use this legislation as a way to have tort reform as part of the bills consideration. I encourage everyone to come to the middle and not let perfection become the enemy of the good.”

The issue, Sen. Reid said, is not about tort reform. “It is about maintaining the stability of our economic infrastructure,” he said.

Sen. Reid said he hopes there is a way the Senate can soon move forward to have the matter brought to the floor.

The House passed a terrorism bill last year establishing a loan program for losses caused by terrorism. The Senate has been considering a quota-share arrangement, but it has gotten bogged down over differences on tort reform.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, June 10, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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Fed Regulator Might Have Bolstered Terrorism Re Bill

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