Lacking Terror, Backstop Bill Is Unlikely

"At this point, we're very discouraged," Robert Gordon, senior counsel to the U.S. House of Representatives Committee on Financial Services, told a group of actuaries gathered in San Diego for the Casualty Actuarial Society Spring Meeting.

He noted that his presence at the meeting was a testament to the fact that nothing was happening in Washington for him to work on with respect to the terrorism insurance bill.

Reviewing events since 9/11, he said that while a bill passed in the House "by a good bipartisan margin," it went over to the Senate and "we've been waiting and waiting and waiting."

The Senate isn't "missing the forest for the trees, they're missing the forest for the leaves on trees," he said, noting that the trial bar's influence on the Senate with respect to legal reform provisions in proposed bills have held up the process.

"I think the Senate could act if they decided to show some real leadership on the issue–or if we had another event," he said.

Robert Graham, senior vice president and assistant general counsel for General Reinsurance Corporation in Stamford, Conn., had similar comments.

"Think about what's been occupying the headlines for the past few weeks," he said, referring to questions and political reactions to information about what the Administration knew about al-Qaeda's plans pre-9/11. It's clear that "little if anything will be done until (a) the elections are over in November or (b) there's another attack," he said.

"Turn that around" and you have the questions of what did Congress know about the likelihood of another attack and "how responsible have they been in addressing it?" Mr. Gordon said.

"Congress has now clearly been put on notice," he said.

The two men spoke during a panel discussion entitled "Dealing With Terrorism: Next Steps?" John Kollar, an actuary and vice president of consulting and research for the Insurance Services Offices in Jersey City, N.J., moderated the session.

Later in the session, the House Financial Services Committee's senior counsel also suggested that "the government doesn't know how to create compensation programs" to respond to events like Sept. 11 or even wildfires in New Mexico.

Mr. Gordon said there are a lot of difficult decisions involved, such as how is money going to be used, who to give it to, what sort of distribution system will be used.

"It takes a long time for the government to set up a bureaucracy," he said.

"That's the whole reason we have the insurance industry, he said, citing what he called the "critical points" of a recent study by the General Accounting Office. "It's much more efficient to use the system that's in place?the insurance industry?and create a federal backstop to make that work," he said.

"Is tort reform an excuse? Is there any hope of separating that issue out?" asked another panelist, William Kirven, Colorado's insurance commissioner.

"I wish that were the case," Mr. Gordon said. "Unfortunately, the groups that are involved have too much political impact," he said.

On a state level, Commissioner Kirven was asked to give his views–and the NAIC's views–on terrorism coverage and exclusions.

"We resisted the exclusions, but we recognize that to maintain the viability of the market, we can't compel our insurance companies to underwrite risks for which they can not obtain reinsurance," he said.

Mr. Kirven also said that not allowing the exclusions would "not only undermine the [insurance] market for terrorism, but undermines the market's ability to fund other losses" not related to terrorism.

"We are very reluctant to see the ?pass-the-business-express' down to consumers and business people," he said, borrowing a phrase he attributed New York's insurance commissioner Greg Serio. But "we do not have the legal authority to mandate terrorism coverage," Commissioner Kirven said.