Insurers Lament Senate Inaction on Crucial Federal Terrorism Insurance Legislation

The push to enact federal terrorism insurance before the end of the year failed on Dec. 20 after promising Senate legislation was held hostage because some provisions ran contrary to the trial lawyer’s agenda, according to the American Insurance Association (AIA).

“Politics has trumped sound public policy,” said Robert E. Vagley, AIA president. “There is broad agreement on both sides of the political aisle on Capitol Hill, as well as in the Bush Administration, that this legislation is vital to the U.S. economy.”

Pending bipartisan Senate legislation provides for a short-term, co-insurance arrangement between the private insurance market and the federal government, which would be standing in the shoes of the reinsurance industry. Due to the fundamentally altered nature and potential scope of terrorist-related losses, reinsurers stopped providing coverage for terrorism almost immediately after the Sept. 11 attack. This caused an insurance market crisis that already has disrupted whole sectors of the economy, and will be greatly beginning exacerbated Jan. 1, when the bulk of reinsurance and commercial insurance contracts expire.

The tort reform section of the Senate bill was never settled, due to the unyielding nature of anti-tort reform forces. As the Washington Post editorialized Dec. 17, the position of those congressional members who were unwilling to allow inclusion of reasonable tort reform in the bill “smacks of the trial bar, which never saw a disaster that didn’t justify a lawsuit.”

“Valuable time was lost — at the end of the session when time becomes so precious — because of this intransegence,” stated Vagley. “The trial bar and their allies who refused to yield to the greater imperative bear responsibility for any resulting negative economic consequences.”

Vagley added that the insurance industry and other members of the business community worked tirelessly to enact legislation to prevent any economic disruption. “It would have been our preference to have seen that legislation enacted. Instead, we will come back in January and pick up this effort where we left off,” he said. “We know that the primary beneficiaries of this legislation are American consumers, and the companies of all types and sizes with whom they do business on a daily basis. Bearing that in mind, we will do everything we can to enact workable terrorism insurance legislation as soon as possible.”

Topics Catastrophe Carriers Natural Disasters Legislation Market Politics