NAIC Outlines Principles for Federal Role in Terrorist Insurance Coverage

October 29, 2001

In Congressional testimony, National Association of Insurance Commissioners (NAIC) President and Kansas Insurance Commissioner Kathleen Sebelius outlined the NAIC’s suggested role for the federal government in insurance for future terrorist acts. Testifying before the Senate Banking Committee, Sebelius shared the association’s 19 “guiding principles,” which state regulators believe should form the basis of a federal program.

The Need for Federal Action — “There is a need for the federal government, working with the state regulatory system, to provide appropriate assistance to spread the risk of terrorism coverage,” Sebelius said. “In doing so, however, Congress should begin its consideration of federal assistance to the insurance industry by recognizing the strength and adaptability of the private insurance markets.”

Talking about the federal government’s role, Sebelius said any action should be limited in scope and duration: “We believe federal assistance should be a relatively short term solution to stabilize the marketplace while it regains the risk-assessment and pricing mechanism needed for private insurers to underwrite terrorism exposure.”

Citing the role states are already playing in this new insurance marketplace, Sebelius stated, “Clearly, it makes eminent sense for Congress to structure any federal assistance program to take full advantage of the existing state regulatory system. This regulatory system is backed by an impressive array of human and technical resources, with mechanisms in place to monitor insurer solvency and handle claims-payment issues.”

She also clarified the role state insurance regulators play in property and casualty insurance policies for large business operations. “It is important to recognize that states are not initiating market requirements in these areas, but only reacting to market forces that threaten to deny consumers fair insurance coverage,” Sebelius said.

Echoing previous testimony before the House Financial Services Committee, Sebelius stressed once again the NAIC’s strong belief that the nation’s insurance industry is well capitalized and financially able to withstand the pressures created by the Sept. 11 attacks. “However, federal actions that unduly disrupt or interfere with private market forces are likely to end up causing more harm than good for American consumers and federal taxpayers,” Sebelius said.

NAIC Vice President and Iowa Insurance Commissioner Terri Vaughan testified before the Senate Commerce, Science and Transportation Committee on Oct. 25. A copy of the complete testimony is available on the NAIC website at

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