A vote by the House Financial Services Committee last week to approve legislation to aid insurance consumers following future terrorist attacks serves as a momentum builder on Capitol Hill, according to Independent Insurance Agents of America (IIAA) CEO Robert A. Rusbuldt.
The panel debated the Terrorism Risk Protection Act (HR 3210) that was introduced jointly by committee Chairman Mike Oxley (R-Ohio) and Rep. Richard Baker, chairman of the Capital Markets, Insurance and Government Sponsored Enterprises Subcommittee. Baker’s sub panel has primary jurisdiction over insurance issues in the chamber.
The bill would offer tax incentives and temporary government guarantees to insurance companies to ensure continued availability of terrorism coverage. The committee approved HR 3210 by voice vote after lengthy debate over several issues, such as a provision to shield insurance companies from punitive-damage claims.
Rusbuldt commented that independent agents and brokers commend Chairman Oxley and Rep. Baker for their leadership on this critical national policy issue. Rusbuldt noted that normally high-profile issues take months, if not years, for Congress to resolve, adding that the urgency that Chairman Oxley and Rep. Baker have given the terrorism reinsurance issue has helped ensure quick Congressional action.
Rusbuldt commented that it is important that Congress resolve this issue as soon as possible, noting that as a nation, we do not have the luxury of time because most reinsurance contracts expire at year’s end. This issue must be resolved before then so terrorism coverage continues uninterrupted. The House vote is the first of many steps toward enactment of legislation to address this critical national economic concern.
The legislative action is in response to concerns by consumers, Congress, the Bush Administration, the insurance industry and business leaders that terrorism coverage will largely be unavailable when approximately 70 percent of reinsurance contracts expire Jan. 1.
A number of domestic and foreign reinsurance companies already have announced that in the wake of the Sept. 11 terrorist attacks, they will no longer offer terrorism reinsurance to primary insurance companies. Without this coverage many insurance companies warn that they cannot support repeated terror claims and will leave markets, exclude terrorism coverage or charge higher premiums that could make insurance unaffordable and largely unavailable for many businesses-large and small alike.
IIAA supported passage of the Terrorism Risk Protection Act in the Financial Services Committee, despite some concerns. IIAA President Tom Ahart, a principal with the Ahart, Frinzi agency in Phillipsburg, N.J., said the Committee’s bill is a very significant step in the right direction, but its provisions are different than purchasing traditional reinsurance. Ahart remarked that it will be interesting to see if companies incorporate the entire price of a potential loan in their ratemaking.
Ahart stated that IIAA has consistently made it known that the status quo, particularly after Jan. 1, is unacceptable for its members’ business and commercial lines’ clients.
“Independent agents and brokers have been told by numerous insurance companies that the affordability issue could become a real problem next year for their business clients,” Ahart continued. “IIAA’s goal is to avoid a ‘liability crisis’ such as that experienced by our nation in the ’80s, when some of our members’ clients were forced out of business because they could not afford insurance coverage.”