Lame Duck and Coverage

Between now and the next time Insurance Journal publishes, Americans will have made their choice for president. Judging from the last national election, the polls will have closed but the counting of the votes might still be underway.

With the presidential election over, there should be less to distract lawmakers who have failed to renew the Terrorism Risk Insurance Act (TRIA), which provides an essential backstop that allows the private insurance industry and all businesses to do their job in this time of war. TRIA’s end date of Dec. 31 poses a huge problem for commercial insurance policies taking effect on or after Jan.1, 2005, as the end of the typical one-year policy will extend beyond the sunset date.

“This period over the next few months is critical. An absence of the TRIA reinsurance backstop will cause major uncertainty—this is bad for business and bad for our economic recovery,” noted David A. Winston, senior vice president for the National Association of Mutual Insurance Companies (NAMIC).

There is broad bipartisan support for extending TRIA for two years. Backers in the House of Representatives include Rep. Pete Sessions, (R-Tex.), Rep. Eric Cantor, (R-Va.), Rep. Richard Baker, (R-La.), Rep. Sue Kelly (R-N.Y.), Rep. Michael Capuano, (D-Mass.), Rep. Steve Israel, (D-N.Y.), Rep. Barney Frank, (D-Mass.), Rep. Paul Kanjorski, (D-Pa.), Rep. Martin Frost, (D-Tex.), Rep. Darlene Hooley, (D-Ore.), and Rep. Dennis Moore, (D-Kan.) among others.

In the Senate, TRIA has also received strong bi-partisan support from Senators Christopher Dodd, (D-Conn.), Chuck Schumer, (D-N.Y.), Jack Reed, (D-R.I.), Chuck Hagel, (R-Neb.), Elizabeth Dole, (R-N.C.), Jim Bunning, (R-Ky.), Mike Crapo, (R-Id.), Lincoln Chafee, (D-R.I.), Harry Reid, (D-Nev.), and Ben Nelson, (D-Neb.).

As Maurice Greenberg of AIG recently noted, this is not just an insurance issue, it’s an economic matter. Among the parties trying to get TRIA extended are the American Bankers Association, Association of Art Museum Directors, Mortgage Bankers Association, National Association of Home Builders, The Long Island Import Export Association, The New England Council, Society of American Florists and the U.S. Chamber of Commerce. Even the National Basketball Association, National Football League and National Hockey League know the score and have signed onto TRIA.

Cynics would say the politicians are trying to milk political contributions before acting on a measure of such obvious merit. But the economic consequences are too great to dilly-dally any longer even in a lame duck session. The failure to renew TRIA would decrease U.S. gross domestic product by $53 billion, household net worth by $512 billion, and jobs by some 326,000, according Professor R. Glenn Hubbard, dean of the Graduate School of Business at Columbia University.

Hubbard’s scenario assumes there is not another terrorist attack. Since the government can’t guarantee there will not be another one, it must minimize the impact and protect everyone, including the nation’s commercial insurers and economy.