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.

NAMIC believes that Congress has it just about right. We believe that increases in the event trigger, deductibles and copayments, as recommended by the administration, would upset this balance and wind up having the opposite effect–reducing terrorism coverage and raising the government's exposure.

The magnitude of potential terrorist attacks forces insurers to limit their coverages: The American Academy of Actuaries' high estimate for a single terrorist event in New York City is $778 billion, 70 percent greater than the total property/casualty insurance industry surplus for all commercial and personal lines, which are not covered by the terrorism program.