President Bush’s focus on the continuing danger of another terrorist attack should remind Congress that America’s economic security continues to be at risk since no federal terrorism insurance backstop has been created, the American Insurance Association (AIA) said in reaction to the President’s Jan. 29 State of the Union speech.
“Thanks to the President’s leadership, the war is going well. But he was right to remind us that the terrorism threat remains, and we agree that the price of indifference could indeed be catastrophic,” said Robert E. Vagley, AIA President.
The insurance industry and other members of the business community are pushing Congress for a short-term co-insurance arrangement between the private insurance market and the federal government. The arrangement would have the federal government replace much-needed market capacity formerly provided by the reinsurance industry.
“Congress needs to act, and act soon. Providing a federal backstop will help American consumers by making sure the companies they do business with, both large and small, can continue to grow and prosper,” Vagley said. “Lack of action means terrorism remains uninsurable because of the incalculable risk of potential terrorism losses.”
Many sectors of the American economy are beginning to feel the effects of the insurance crisis, with terrorism insurance now either difficult or impossible to obtain. Federal securities lawyers are even raising the prospect of whether a company’s lack of terrorism insurance coverage should have to be disclosed to investors as a potential ‘material risk.’
“With our economy still in recession and the danger of an attack remaining, the last thing we need to do is delay. Congress should pass an effective, market-based solution immediately,” Vagley said.
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