New Terror Backstop Bill Gets Insurers' Cheers

WASHINGTON--Insurers, agents and policyholders voiced appreciation after Congress gave final approval yesterday to legislation providing a long-term extension of federal reinsurance coverage for catastrophic terrorism losses, saying it will provide needed certainty to the program.

At the same time, smaller insurers were grateful for what Congress didn't do: Extend the program to cover nuclear, biological, chemical and radiological risks.

The support of policyholders came despite the fact that under the new program they will be required to accelerate repayment of the money paid out by the government to cover a terrorist attack.

And the Council of Insurance Agents and Brokers sought to assuage the bitterness of key House Democrats, who voiced anger during yesterday's floor debate on the bill over the fact that the leaner Senate language they were forced to accept was presented to their chamber on a take-it-or-leave-it basis.

"Notwithstanding the well-intentioned concerns of those who supported a broader bill, we regard today's developments as a tremendous victory for policyholders and the industry," said Joel Wood, CIAB senior vice president, government affairs, in a note to members.

"The extension for seven years will provide much-needed certainty for developers that terrorism coverage will be available and affordable well into the future," he wrote.

Mr. Wood noted, "Had the House not earlier approved a more expansive version of the legislation, it is highly unlikely that such a result would have been plausible."

Marc Racicot, president of the American Insurance Association, said, ""Reauthorization of this program is essential to our nation's economic vitality. AIA looks forward to the next step--the president's signature on this legislation."

David A. Sampson, president and chief executive officer of the Property Casualty Insurers of America (PCI), said the final bill "represents significant improvements over what many informed observers expected just weeks or months ago."

On the NBCR issue, PCI made the case that this provision would have likely had a negative effect on the overall program, he said.

"We are pleased that members of Congress understand that attacks using weapons of mass destruction are uninsurable," Mr. Sampson said.

"PCI members felt that it would be an onerous and risky burden for both insurers--particularly small-to-midsized companies--and policyholders to expand the program to require companies to offer NBCR coverage to their policyholders," Sampson said. "We are very pleased that we succeeded in having this provision removed from the final bill."

Charles Chamness, president and CEO of the National Association of Mutual Insurance Companies, agreed, saying, "By resisting the temptation to increase deductibles, co-payments and the trigger level from their current rates, Congress has ensured the continued participation of many medium and smaller-sized insurance companies."

Mr. Chamness added, "We are also pleased that the legislation applies to both domestic and foreign terrorism attacks and places an annual cap on insurers' liability."

He explained that "increasing insurers' liability could have forced many insurers to withdraw from the market, as their exposure relative to premiums earned on terrorism coverages would have been too great."

Robert Rusbuldt, CEO of the Independent Insurance Agents and Brokers of America, added that the "legislation is crucial to maintaining affordable and available terrorism coverage and brings certainty to policyholders, insurers and the insurance market as a whole."

Frank Nutter, president of the Reinsurance Association of America, said the new program "will work well to fill the vacuum in reinsurance capacity for acts of terrorism, will keep premiums paid by policyholders at affordable levels, will provide insurance coverage to support economic activity, and will minimize the need for public disaster assistance should there be future terrorist acts in the U.S."

Martin DePoy, steering committee coordinator for the Coalition to Insure Against Terrorism, a policyholder group, said without the bill, "a great many policyholders across a broad range of industries would have found themselves uninsured against the risk of terrorist attack."

Kathryn Wylde, president and CEO of the Partnership for New York City, said it was "critical" for businesses in New York and other urban centers to have access to coverage in order to finance development and stimulate economic growth. She noted that New York has half of the insured risk in the country.

Janice Ochenkowski, president of the Risk and Insurance Management Society Inc. and managing director of Jones Lang LaSalle Incorporated, said that "RIMS is elated that members of Congress united and recognized the importance of the TRIA [Terrorism Risk Insurance Act] program. The vote to extend TRIA for seven years is critical to U.S. businesses and our economy. TRIA plays a key role in ensuring that businesses have available and affordable options to protect themselves."