Legislation that would modify the federal measure providing a backstop for insurers in the event of catastrophic terrorism loss has been introduced by Sen. Charles Schumer, D-N.Y.
The legislation–S. 2621–would temporarily lower insurer deductibles before tapping the federal reinsurance backstop after a major loss to ensure that companies can withstand multiple attacks within a short time frame.
A similar provision was included in the House version of the Terrorism Risk Insurance Act extension legislation last year but did not make the cut in the final version signed by President George W. Bush.
David Sampson, president and chief executive officer of the Property and Casualty Insurers Association of America, said the group supported the reset concept.
"Unfortunately, future terrorist strikes on our soil are likely to happen," he said. "If two such events were to occur in a short time frame, the insurance market would be called upon to respond to a second major act of terrorism before the previous incident's losses have been paid and before the market has completely rebounded. This could cripple the market."
The reset provision, Mr. Sampson added, would solve the problem and help decrease uncertainty in those markets viewed as especially vulnerable to terrorist attacks.
"Resetting the program deductibles will help stabilize the market and encourage insurers to continue making terrorism coverage available in the future without fear of insolvency," he noted. "This also will help commercial insurance consumers in areas previously attacked, or perceived to be vulnerable, to have access to terrorism insurance coverage."
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