At least charge actuarially sound rates for gov't cover, CFA says
Washington
As Congress debates whether to continue the government's backstop for terrorism coverage, a new study by the Consumer Federation of America argues that insurers should get no federal help.
"It is time to wean insurers and large real estate interests from this lucrative government program," said J. Robert Hunter, director of insurance for CFA as well as a former Texas insurance commissioner and federal insurance administrator. He testified before Congress last week about the study.
Insurer profits and financial soundness are strong, access to capital is at near record levels, and premium rates are falling, noted the study. "It's impossible to justify terrorism insurance subsidies when insurance profits are skyrocketing, property-casualty insurance rates are sinking, and beleaguered taxpayers still face growing budget deficits," Mr. Hunter said.
The Terrorism Risk Insurance Act established a federal reinsurance backstop in the event of a catastrophic terrorist attack by a foreign enemy. The companies do not, however, pay any premiums for the coverage, much to Mr. Hunter's chagrin.
"Had actuarially-based premiums been charged to insurers for the coverage that taxpayers have provided, the Treasury Department would have amassed about $3 billion by now," he said. The report contends that the Congressional Budget Office "appears to favor such a premium charge" and that "even insurers have agreed there is no legitimate argument against such a charge."
CFA's study concludes that "by ending TRIA or sharply cutting it back and charging actuarially sound premiums…, Congress will enable the private sector to grow and manage this coverage," adding that charging risk-related prices "will also enhance mitigation efforts as policyholders seek ways to achieve discounts."
Quotebox, with Hunter mug:
"It's impossible to justify terrorism insurance subsidies when insurance profits are skyrocketing, property-casualty insurance rates are sinking, and beleaguered taxpayers still face growing budget deficits."
J. Robert Hunter, Insurance Director
Consumer Federation of America
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.