[Congressional Record Volume 147, Number 177 (Wednesday, December 19, 2001)]
[Senate]
[Pages S13679-S13680]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                          TERRORISM INSURANCE

  Mr. NELSON of Florida. Mr. President, I wanted to speak briefly on 
the subject of terrorism insurance because in the closing couple of 
days of this session, there is some question as to whether or not we 
will even get a bill. I want to say if we don't, that is a mistake. It 
is a mistake because to do nothing would leave us in the condition that 
we are in now, where so many of the businesses and homeowners and 
automobile owners of America would be in a position of not knowing if 
they are covered by terrorism or not because a number of companies have 
already filed with the insurance commissioners of the 50 States, 
withdrawing terrorism as a risk that would be covered.
  The flip side of that is where terrorism may be covered, and with no 
plan, the opportunity is ripe for the rates to go up considerably. 
Take, for example, the issue of Giant Stadium in the Meadowlands. I am 
told that they have upwards of a 400-percent to 500-percent increase in 
the rates. Is that a fair rate? Only the insurance commissioners of the 
50 States would know, but an insurance commissioner has to determine if 
a rate is fair by looking at data and looking at experience.
  In this particular case, we have precious little data or experience. 
Therefore, the insurance departments of the 50 States are simply not 
going to know or, even if they thought a rate was excessive and 
arbitrary, they are not going to be able to deny the rate because they 
can only deny it if they went into court and proved to a judge in an 
administrative law court, or in a court of law, that it was excessive. 
But they don't have those tools.
  So what should we do? Well, let me say as a backup, if all else 
fails, and I hope it doesn't--and I am talking to the Senator from 
Connecticut, who is a leader; I want to talk about his bill--instead of 
us doing nothing, we ought to take a period of time and pass a bill 
that would say that the Federal Government will treat this as an act of 
war for this short period of time, and assuming the terrorism risk for 
insurance purposes, that there would be no rate hikes and there would 
be the guaranteed terrorism coverage on all the insurance policies--in 
other words, a moratorium on the cancellations that are going on right 
now on terrorism coverage, and a rate freeze on the rates that are 
presently being jacked up sky high in many cases.
  That is what I would suggest that the Congress consider as a backup, 
but we should not have to get to the backup.
  I want to talk to the Senator from Connecticut and the rest of the 
Senate to say that if we took a vehicle such as the Dodd-Sarbanes 
bill--it could be that or it could be the Fritz-Hollings approach but 
an approach that blends the risk being shared by insurance companies 
for the lower amounts, generally in a range of about up to $10 billion 
of losses from a terrorist event, and above that the Federal Government 
would share in an 80-20 or 90-10 arrangement, depending on the size of 
the terrorism loss.
  All of these bills have similarities. But what I would urge, and will 
urge if such a vehicle comes before the Senate by the offering of this 
amendment, is that there be a limitation on the

[[Page S13680]]

amount that the rates can be raised for terrorist insurance risk 
purposes and that part of the premium that would go to the terrorist 
risk would be set aside in the insurance company for accounting 
purposes from the rest of the premium so that we would know how much 
would be there, and if there were no terrorist loss, that could 
continue to be set aside for a catastrophe, which would include the 
terrorist loss. And--this is the part I am not sure those sponsors of 
the bill understand--even though I want to limit the rate increase, 
because I, indeed, think the rates are being raised using the September 
11 horrible tragedy as an excuse to jack up the rates, nevertheless we 
have a responsibility to act, and we could limit those rate increases 
and, in the case that another terrorist event occurs and the loss were 
to occur, there is a portion of my bill on page 2 that would then have 
a surcharge on the policyholders up to the amount of the loss. That 
surcharge would be approved by the insurance departments of the 50 
States.
  In other words, since we would segregate the premium as allocated to 
the terrorist risk, and that limitation of the rates would be a 3-
percent increase only, but if there were a terrorist event that 
exceeded an industry-wide--we are talking about $6 billion of premium--
then the surcharge would kick in. That is the part that I do not think 
those sponsors understand. They know I am a former insurance 
commissioner and I am quite concerned about rates being jacked through 
the roof and the consumer taking it on the chin, and that is why I 
wanted to come to the Chamber to speak. That is why I am so 
appreciative that the Senator from Connecticut is here.
  I just got off the phone with the general counsel of State Farm, 
someone whose advice I valued over the 6 years I was insurance 
commissioner prior to coming to the Senate. I will be talking to 
several other CEOs and general counsel. This is, in part, what we have 
been talking about all along, and it is not something that insurance 
companies should think is an anathema to their position.
  What is an anathema to their position is for them to gouge the 
public, the consumers, because it sets a limitation on the rates, but 
it is a fair way of approaching it. Clearly, at the end of the day, it 
is a way of protecting the businesses of America, the homeowners of 
America, and the automobile owners of America who, if we do nothing, 
are facing the prospect that insurance companies have withdrawn their 
coverage for a terrorist attack.
  I thank the President for the opportunity to speak on this very 
important subject that is so important particularly at the eleventh 
hour of this session of Congress.
  Thank you, Mr. President.
  The PRESIDING OFFICER. The Senator from Virginia is recognized.

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