[Congressional Record Volume 151, Number 62 (Thursday, May 12, 2005)]
[Senate]
[Pages S5011-S5014]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
TERRORISM RISK INSURANCE EXTENSION ACT OF 2005
Mr. SCHUMER. Mr. President, I ask unanimous consent that Mr. Reid
from Nevada be added as a cosponsor of S. 467, the Terrorism Risk
Insurance Extension Act of 2005, introduced by my friend, Senator Dodd
of Connecticut.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. SCHUMER. Mr. President, we still live in America, and
particularly in my city of New York, in the shadow of 9/11, of the
terrorism that occurred. Obviously, the thousands of families who have
had a loved one taken from their midst live with it every moment of
their remaining lives, but the rest of us live with it, too, not only
in empathy for them but also in terms of the economic consequences of
terrorism.
The bottom line is very simple, and that is, because of terrorism,
the insurance industry, in terms of insuring risk of large structures
in America--whether it be large buildings that make us so proud of the
Manhattan skyline, or large arenas such as the football stadiums that
dot America, or larger facilities such as Disneyland, Disney World, and
amusement parks--all have difficulty getting insurance.
Insurers are worried that if, God forbid, another terrorist act
occurs it will be so devastating that it will put them out of business.
So they either provide no insurance or provide it at such a high rate
because of the downside risk. Small as it may be--and we hope it is--it
is still possible that an act so enormous that if, God forbid, it
occurs, they do not want to be involved.
So 2 years ago, the Senate, House, and the President got together at
sort of the end of the day and passed terrorism risk insurance. It has
been a large success. Insurance rates have come down, terrorism
insurance is available, and insurance companies know if, God forbid,
the worst happens there will be a backstop, and they are willing to
issue policies. In turn, that means developers, builders who want to
build new large structures in America, will do so, employing thousands
and thousands of people, creating profits and new businesses as well.
We now come to the fact that this legislation expires--it was passed
as an experiment; those who were dubious of it said, Let's see how it
works--in December. But the urgency to act is much sooner than December
because policies are not written for 6 months. If right now you are a
business and you want to renew your insurance against risk for 1 year
or 2 years or 3 years, that policy would go beyond December.
What the insurers say to many is, ``I will raise your rate
dramatically'', which will raise costs and shut down construction, or
``I will not insure you at all'', which certainly shuts down
construction. It means nothing will get built. So we should move this
legislation quickly.
I stress we do not need to repeat last year by delaying and delaying.
Last year, we began to witness, when we delayed a great deal, a loss in
economic activity in the larger cities of this country in particular,
even though we were well aware that ultimately this had to be done.
There are really only two alternatives. One is going to be no
terrorism insurance. The private market will not fill the gap. That
will prevent tens of billions in projects from going forward this
summer and this fall, not next year but right now.
The second is that the market will fill the gap but only at such
extraordinary prices and only in unique situations that the same thing
would happen.
Why are we sitting in the Senate and in the House twiddling our
thumbs? Our economy is squishy, oil prices are up, other economies
outside of Asia are down, including Japan's actually, and, therefore,
we are worried about the economy, and here we are putting another log
on the tracks in the way of economic recovery.
There can be no dispute that terrorism insurance works, and there can
be no dispute that if we do not renew it, there will be trouble. The
ratings agencies have said in no uncertain terms that come December 31,
if there is no terrorism insurance, they are not going to be able to
give any kind of decent rating to any insurance offer.
These guys are insurers. They look for risk. They live with risk.
They wake up in the morning thinking a risk, they go to sleep at night
thinking a risk. We can say, oh, well, and have an ideological debate
about how much should the Government be involved, or we can say,
actually, people are not as worried about terrorism. It does not matter
what you think, Mr. President, or what I think, it is what these
insurers think. If the rating agencies say they are not going to give a
decent rate to insurers, it is over, and we will not have it.
Moody's noted in an insurance brokers report that up to 75 percent of
the policies written since January 1 have adopted a conditional
endorsement that voids terrorism coverage if TRIA is not renewed. As we
go through the year, the number of endorsements, they said, is expected
to increase.
The report specifically stated these conditional endorsements appear
to be an indication that unless terrorism insurance is renewed, premium
spikes or a sharp reduction in the availability of coverage may result.
The report warns--this is very important--that Moody's is unaware of
any viable private market initiative that would take the place of TRIA.
There are some who say: Let it expire and let's see what the market
does. That is taking a huge risk because if the market does not come
in, then we have hurt construction workers, laborers, and all those
who would work in these buildings.
Alan Greenspan, the Chairman of the Federal Reserve, is a very well-
respected voice around here, as he should be, in my opinion. He is a
free-market guy. He does not like Government involvement. Right now, I
am going toe to toe with him about Fannie Mae and Freddie Mac. He would
like to curb their role because he does not like the Government
involved. I think they are needed in the housing market. But on
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terrorism insurance, even Alan Greenspan admits it is needed. Here is
what he said:
This is a very difficult issue, because remember that the
private markets work exceptionally efficiently in a civilized
society in which domestic violence or violence coming from
abroad is not a central factor.
You cannot have a voluntary market system and the creation
of markets, especially insurance markets, in a society
subject to unanticipated violence. And as a consequence,
there are certain types of costs, which is what we have the
Defense Department protecting us from, which we essentially
choose to socialize.
The less of that we have, the better off society is.
Of course, this is his view, and he wants to make sure you know he
does not want us to do this everywhere.
There are, nonetheless, regrettable instances in which
markets do not work, cannot work. And while I think you can
get some semblance of terrorism insurance, I have not been
persuaded that this market works terribly well.
It is pretty clear, we need to renew this legislation, and it is
likely we will renew it. What is so incredible is we are waiting and
waiting, and every day we wait causes damage to jobs and the economy.
The bottom line is that financial dislocation caused by another
possible terrorist attack--God forbid--is too much for our country to
risk. I urge the entire Senate to pass this legislation quickly. It is
cosponsored by 25 of my colleagues, and we should move it without delay
and let the markets, let the insurance world, and, most of all, let
jobs and construction go forth.
I yield the floor, Mr. President, and suggest the absence of a
quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The Journal clerk proceeded to call the roll.
Mr. REED. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. REED. Mr. President, I would like to be recognized as in morning
business.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. REED. Mr. President, I rise to discuss the Terrorism Risk
Insurance Act, or TRIA. This law is necessary to make our economy
function smoothly and effectively and to protect it from the risk of a
terrorist attack.
After 9/11, we enacted a number of measures including the Terrorism
Risk Insurance Act, to enhance and stabilize the security of our
citizens and our economy. TRIA provided a high-level Federal backstop
that allowed private insurance and reinsurance markets to return and to
allow American businesses to overcome the shock of September 11. TRIA
seems to have performed exactly as we intended, but as we all know the
program expires at the end of this year. I am getting concerned that we
are fast approaching the point where we need to move forward and
reauthorize the TRIA. We can't allow this program to expire without a
short-term extension or longer term solution to be put in place.
But as we consider whether to extend TRIA, we should look closer at
the two main goals we tried to accomplish with the law. First, as I
just noted, we wanted to make sure that the market and the economy
functioned in the wake of 9/11 and in the face of the threat of terror.
After 9/11, the insurance companies looked at their risk for the first
time in the context of a mass casualty destructive act that would
destroy buildings, that would kill perhaps thousands of people, and
they decided that they alone could not take this risk. In light of the
new conditions, the passage of TRIA, provided a necessary backstop, and
allowed the private insurance companies and the market to function
effectively.
One of the areas that I became concerned about was workman's
compensation. Most people would say: What does that have to do with a
major attack that falls upon a large building or a major city or some
other key facility? The point is thousands of workers are covered by
workman's compensation. Those deaths and injuries would trigger
workman's compensation. That is just one example of the situation
caused by 9/11, the situation of uncertainty, the situation of
potentially huge losses which never before were fully calculated by the
insurance companies. That part of the purpose of TRIA has worked very
well. Our insurance markets are functioning smoothly today.
But there is a second important reason, and that second important
reason is that many of us felt that we needed to have a policy in place
all the time to allow the economy to rebound more quickly in the
unfortunate event of another terrorist attack here in the United
States.
Let me just remind you, as we left this Chamber yesterday morning, as
we moved to assembly areas, as we evacuated all these buildings, the
notion of a further terrorist attack was not something hypothetical or
remote. For an instant there, there was real concern that we would be
struck again. And if we are struck again and we do not have in place a
terrorism reinsurance program, the insurance industry will once again
face the same dilemma we saw on 9/11: we can't cover these risks; we
are overexposed; we can't provide insurance in the future. That slows
the economy down and potentially in many different ways. TRIA has to be
in place. As long as we are sincerely persuaded that there is a
terrorist threat, and I know I am, then we have to have this TRIA
program in place.
Some opponents of the extension argue that TRIA should be a temporary
program because by ending it private terrorism insurance markets will
be forced to stabilize and provide adequate capacity to meet the demand
for coverage. I do not think that will happen. I think the markets will
stabilize because companies will not write risks. And if you are trying
to build a major building in a major city, guess what? Try to get
insurance. If you propose to put in a major office complex with
thousands of workers, try to get workman's compensation insurance. You
will not get it. That is the way the market will respond to the
uncertainty caused by the potential attack of terror, and that will
hurt our economy grievously. I think we have to recall and realize that
we still are under the threat. I think we have to also be conversant
with the fact that there will be dramatic economic effect even if a
small attack is waged by terrorists because the psychological dimension
is just as important in many respects as the physical damage. So we
have to have in place this terrorism reinsurance program, and we are
running out of time to do it right, carefully, thoroughly, and get it
done before the end of the year. As you may know, the Treasury
Department is required to report to Congress by June 30 of 2005 on
issues associated with the act and its purposes. While I am looking
forward to the conclusion of the Treasury Department study, it will
have little, if anything, to do with the second aim of the law; namely,
having a policy in place in the event there is another attack in the
United States.
It is this ``preparedness'' reason that most compels me to believe
that we need to continue a Federal terrorism insurance program. This
Congress, Senator Dodd and Senator Bennett reintroduced the extension
bill, S. 467, the Terrorism Risk Insurance Extension Act of 2005, of
which I am an original cosponsor. In addition to extending TRIA to
2007, this bill establishes a Presidential working group on financial
markets to submit a report to Congress containing recommendations to
address the long-term availability and affordability of terrorism risk
insurance.
The administration thus far has been silent on extending TRIA. It is
essential that the administration lead rather than follow in this
process of legislative deliberation. Furthermore, vacancies in key
administration positions have led to a vacuum in leadership and
communication needed for good policymaking as we approach deliberations
on TRIA. Extending TRIA is absolutely the right thing to protect the
economic security of our country. I urge my colleagues to take a close
look at this legislation and join us in supporting it.
I thank the Chair. I yield back my time.
Mr. REID. Mr. President, I ask unanimous consent to include in the
Record at the conclusion of my remarks a written statement that I
submitted at a symposium sponsored by the U.S. Chamber of Commerce on
extending the Terrorism Risk Insurance Act, or TRIA, and a letter
signed by seventy-four CEOs of the largest integrated financial
services companies in
[[Page S5013]]
the country which provide banking, insurance and investment products
and a second letter from the Coalition to Insure Against Terrorism,
CIAT, which represents over seventy-five companies and major
associations, a virtual cross section of the U.S. economy, both of
which express strong support for extending the terrorism insurance
program.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See exhibit 1.)
Mr. REID. Mr. President, in 2002 I co-sponsored, and Congress passed,
the Terrorism Risk Insurance Act, commonly referred to as TRIA. This
important legislation provided a government backstop for the terrorism
insurance market that disappeared after the attacks of September 11.
TRIA is working. Today, because of TRIA, terrorism risk insurance is
available and businesses have meaningful access to coverage. The
primary purpose behind TRIA, and the reason it needs to be extended, is
to make sure that the American economy and markets function in the face
of a terrorist threat. There needs to be a mechanism in place to allow
the economy to rebound more quickly and to protect American jobs in the
unfortunate event of another terrorist attack here in the United
States. The threat of an attack has not gone away and will not go away
when TRIA expires at the end of 2005.
While some in Washington continue to hope that a private market will
develop in the absence of TRIA, let me quote from two reports put out
recently by those who are in the business of watching markets. The
first is a Special Report by the rating agency Moody's Investors
service dated April 28 which expressed concern about the potential
effects of the pending expiration of the Terrorism Risk Insurance Act,
TRIA.
Moody's noted, that insurance brokers report that up to 75 percent of
policies written since January 1st have adopted a conditional
endorsement that automatically voids terrorism coverage if TRIA is not
renewed, and that the number of conditional endorsements is expected to
increase as the year progresses. The report stated, ``These conditional
endorsements appear to be an indication that unless TRIA is renewed,
premium spikes, or a sharp reduction in availability of coverage, may
result. The report warns, ``Moody's is unaware of any viable private
market initiative that would take the place of TRIA.''
Secondly, Marsh Inc., in a report released on April 25, entitled
Marketwatch: Terrorism Insurance 2005, concludes: ``If TRIA is not
extended, the stand-alone insurance market is unlikely to have
sufficient capacity to satisfy all of the expected demand at
commercially viable prices.''
The Bush administration official who spoke at the recent U.S. Chamber
symposium on TRIA simply gave those in attendance a history lesson on
the issue, but refused to give any indication whether the
administration would support or oppose an extension of TRIA. Policy
holders from major sectors of the economy--real estate, financial
services, energy, entertainment, hotel, and hospital industries--feel
like they are being left to twist in the wind wondering whether the
administration and the Congress are going to take the necessary action
so that they can properly and responsibly protect their properties.
There is absolutely no sense of urgency by this White House and I think
they would like to see this issue quietly go away.
The financial dislocation caused by another possible terrorist attack
is too important to ignore and we should not continue to delay action
on an issue that is so important to our economy and the American
workforce. We should act on extending TRIA and act promptly.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Chamber of Commerce Terrorism Reinsurance Conference
Remarks by Senator Harry Reid
(Thursday, March 17, 2005)
I was a co-sponsor of the Terrorism Risk Insurance Act
(TRIA), which Congress passed in 2002, and I strongly agree
with many of you, that we need to extend this important
program as soon as possible.
After the attacks of September 11th, private insurance was
no longer available to cover losses caused by terrorist
attacks. It became impossible to purchase property and
casualty insurance to cover losses to real property and the
people in those buildings because the risk was too difficult
to measure. This created serious problems in the real estate
and commercial development sectors and essentially stopped
construction of new buildings because banks would not loan
money for projects that could not be insured.
When a meaningful market for terrorism insurance failed to
develop after several months, it became clear that Congress
needed to do something to prevent continued disruption to the
economy.
We passed TRIA and it is working today.
Because of TRIA, terrorism risk insurance is available and
businesses have meaningful access to coverage. I don't think
we can underestimate its impact on the economic recovery we
have seen in Nevada and other parts of the country.
As you know, TRIA is set to expire at the end of 2005. Its
looming expiration has huge implications for our economy and
job creation. Already I have heard reports that insurance
providers will not write terrorism insurance policies in
large, metropolitan markets such as Las Vegas, Chicago and
Washington, DC in light of TRIA's near expiration. I regret
that this is taking place, and I worry about the impact this
will have on our economy if the insurance they need is not
available.
The White House seems to be content on waiting for the
Treasury Department's report on the terrorism insurance
market before making any decision. That report is not due
until June 30th. That's too late and waiting until this
summer to make a decision creates too much uncertainty for
the real estate, construction and insurance industries.
When many of us voted for TRIA, we did so for two principle
reasons. First, we wanted to make sure that the markets
functioned in the face of the threat of terrorism. We wanted
to restart the construction industry and get people back to
work. But the second important reason for this legislation--
and I believe President Bush stated this when he signed the
bill into law--was that many of us felt that we needed to
have a policy in place to allow the economy to rebound more
quickly in the unfortunate event of another terrorist attack
here in the United States. We felt that having an insurance
program in place would ensure that economic activity would
continue after a terrorist attack.
And this second reason is why I am so concerned about the
President's ``wait and see'' approach to extending TRIA. The
Treasury department's study--whatever it finds--is only
focusing on the first reason that TRIA was put in place. It
has little, if anything, to do with the second reason for the
Act.
It is this ``preparedness'' reason that is the real
convincing reason that causes me to say we need to continue a
Federal terrorism insurance program, and we do not have to
wait for the Treasury department to further the debate on
that.
I also support inclusion of group life coverage in the TRIA
bill when it is reauthorized. There continues to be a lack of
available catastrophe reinsurance coverage for the group life
insurance industry and the absence of reinsurance coverage
poses a significant risk for the 156 million American
families who rely on the promised survivor benefits of their
group life insurance policies.
If the President is serious about creating jobs and
maintaining the health of the U.S. economy, he needs to get
behind efforts to extend this law now. Otherwise, it is just
not going to happen. American businesses are already being
told by insurers that they face the prospect of going without
terrorism coverage by year-end.
Prior to TRIA's enactment in 2002, $15 billion in real
estate transactions were cancelled or put on hold because
there was no terrorism insurance available. Commercial
construction was at a six-year low. According to the White
House, over 300,000 construction jobs were lost or put on
hold because there was no terrorism insurance available. Bond
rating agencies downgraded $12.5 billion worth of commercial
mortgage-backed securities because of the lack of available
terrorism insurance. Lenders began to ``force place''
terrorism insurance coverage on many properties, despite the
fact the only available terrorism coverage was deficient,
defective and priced at levels that negatively affected the
economics of the underlying properties.
Extending TRIA makes good economic sense, and I hope the
White House and my Republican colleagues who control its fate
will work with our caucus and move swiftly to extend it.
____
The Financial Services Roundtable,
Washington, DC, April 27, 2005.
Hon. Bill Frist,
Hon. Harry Reid,
U.S. Senate, Washington, DC.
Hon. J. Dennis Hastert,
Hon. Nancy Pelosi,
House of Representatives, Washington, DC.
Dear Majority Leader Frist, Speaker Hastert, Minority
Leader Reid and Minority Leader Pelosi: We are writing in
support of an extension of the Terrorism Risk Insurance Act
(TRIA).
The Financial Services Roundtable represents 100 of the
largest integrated financial services companies providing
banking, insurance, and investment products and services to
the American consumer.
TRIA is not likely the long term answer to how policy
holders, insurers and the government deal with terrorism
coverage. It is,
[[Page S5014]]
however, a program that keeps policy holders from bankruptcy,
insurers from insolvency, and taxpayers from paying the full
cost of a catastrophic terrorist event. From this standpoint,
it has been a success and it is essential that the program be
extended for a determinant period of time.
An extension should meet the following principles:
It should extend the current program for a reasonable
period of time;
It should hold retention levels at the current program
limit;
It should provide a backstop for group life policies; and
It should require stakeholders to determine the nature of a
public private partnership going forward (including,
specifically, a study of how to deal with threats posed by
nuclear, biological, chemical and radiological attacks).
We recognize that TRIA is not working perfectly for all
stakeholders. For some insurers the retention levels require
companies to underwrite as if the program does not exist, and
any increase in retention levels will render the program
useless. But we believe that TRIA has helped to stave off the
economic dislocation that could have filled the vacuum left
by drain of insurance industry capital post-9/11. In
instances where states have granted exclusions, insurers who
otherwise could have walked away from this type of risk have
not because of TRIA. In states where no exclusion exists, or
for those carriers who write worker compensation coverage,
the backstop is insurance against insolvency.
Thank you for your attention to this important issue.
Please do not hesitate to contact us if we may be of
assistance on this or other issues.
Best regards,
Steve Bartlett,
President and CEO.
Also signed by 74 others.
____
Coalition To Insure
Against Terrorism,
Washington, DC, April 26, 2005.
Dear Senator Reid: The Coalition to Insure Against
Terrorism (CIAT), a broad-based coalition of business
insurance policyholders representing a significant segment of
the nation's GDP, strongly supports S. 467, the Terrorism
Risk Insurance Extension Act of 2005, introduced by Senators
Bennett and Dodd. As the principal consumers of this vital
insurance coverage, CIAT urges you to cosponsor this
important legislation.
With the Terrorism Risk Insurance Act (TRIA) set to expire
at year-end, there is no evidence to suggest that insurance
markets will be able to provide adequate insurance against
catastrophic acts of terrorism without a federal reinsurance
backstop. Based on recent testimony from senior
Administration officials, the threat of terrorism within our
homeland remains as high as it did on 9/11. Earlier this
year, CIA Director Porter Goss said before the Senate
Intelligence Committee: ``It may be only a matter of time
before al-Qa'ida or another group attempts to use chemical,
biological, radiological and nuclear weapons'', and ``al-
Qa'ida is intent on finding ways to circumvent U.S. security
enhancements to strike Americans and the Homeland.''
This stark reality, together with the unique factors that
make the terrorist threat akin to the risk from war,
continues to prevent insurers from effectively modeling and
pricing the risk of future catastrophic terrorism attacks,
thereby seriously hampering the development of any viable
catastrophic reinsurance alternatives to TRIA.
To date, the terrorism reinsurance program established by
TRIA has achieved the goals envisioned by President Bush and
bipartisan leaders in Congress in 2002. First, it has helped
keep the economy going in the face of continued terrorist
threats by ensuring that businesses across America can secure
this essential coverage, saving countless jobs in the
process. Second, it serves as an important tool to minimize
the severe economic disruption that almost certainly will
occur should there be a future terrorist attack of
catastrophic proportion.
S. 467 would extend the current TRIA program for a short
period of time while also creating a group of insurance and
risk management experts to work with the Presidential Working
Group on Financial Markets to develop a longer-term solution.
If enacted, this legislation will ensure that the nation's
workers and businesses will be able to secure adequate and
affordable insurance coverage against terrorism after year-
end, and that the nation has a sound policy in place to
enable the economy to quickly recover should another
terrorist attack occur in the U.S.
CIAT believes that it is absolutely critical that Congress
act quickly to extend the Terrorism Risk Insurance Act (TRIA)
beyond December 31, 2005. Extending TRIA is an essential part
of our nation's economic preparedness against terrorism, as
well as an essential element of our nation's economic
security. With only a few months left, American businesses
and property owners face the threat of going without adequate
and affordable terrorism insurance coverage next year.
Without a federal terrorism risk reinsurance program in
place, our economy will be needlessly disrupted and
significant U.S. economic interests and jobs are likely to be
exposed to the uninsured costs of a major terrorist event.
To this end, CIAT respectfully requests that you cosponsor
S. 467.
Sincerely,
The Coalition To Insure
Against Terrorism.
____________________