The Last Word: Millions-wise, billions-foolish

The Obama administration’s 2010 fiscal budget calls for changes in the terrorism risk insurance program that would save an estimated $644 million by shifting additional costs to the insurance industry. While NAMIC shares the administration’s goal of reducing the deficit after the immediate financial crisis abates, we submit that making these changes would be like the old saying, “penny-wise, pound-foolish.” Or, in today’s world, “millions-wise, billions-foolish.” Congress first adopted the Terrorism Risk Insurance Act in 2002, in the aftermath of the tragic events of Sept. 11, and subsequently amended and extended the program in 2005 and 2007. Each time, Congress held exhaustive hearings examining developments in the private insurance market and then adjusting the levels of private sector retention of terrorism losses. The goal has been to maximize private sector coverage and minimize the federal government’s exposure.