[Congressional Record Volume 151, Number 154 (Friday, November 18, 2005)]
[Senate]
[Pages S13351-S13352]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
TERRORISM RISK INSURANCE EXTENSION ACT
Mr. JOHNSON. Mr. President, this week the Senate Banking Committee
reported out S. 467, the Terrorism Risk Insurance Extension Act of 2005
which will extend for 2 years the terrorism risk insurance program that
is due to expire on December 31. I suspect the insurance industry is
breathing a collective sigh of relief that this bill has finally passed
in the Senate. All Americans concerned about economic growth should
also feel some relief.
This bill represents a compromise between the very strong views of
the administration and the approach originally set forth in the bill as
introduced. I must commend Senators Dodd and Bennett and their staffs
for their tireless work on this legislation, as well as Chairman Shelby
and Ranking Member Sarbanes. I understand that getting to this point
was not without its challenges. Nevertheless, we arrived at a
bipartisan compromise.
There are still some who believe that we do not need a terrorism
insurance program with a Federal backstop; that the capacity of the
industry to provide this insurance has improved, and the program has
achieved its goals. Frankly, I am not convinced. Because of the random
and unpredictable nature of terrorism, I am not yet convinced that the
private sector can adequately or accurately assess terrorism risk in
the absence of a Federal backstop.
It has been 4 years since the September 11 attacks that prompted the
passage of the Terrorism Risk Insurance Act. And while we have been
fortunate here in the United States that no events have triggered the
use of this Federal backstop, the bombings in London this summer, the
Madrid train bombing last year, the nightclub bombing in Bali in 2002,
and the alarming increase in suicide bombers in the Middle East serve
as painful reminders of the reality of the ongoing war on terror, and
the fact that attacks can happen anywhere at anytime.
Prior to September 11, the risk of terrorism was not a factor when
insurers wrote policies. However, in the post-9/11 environment, the
availability of affordable insurance for terrorism risks has become a
necessity. The war on terror involves protecting our homeland and
protecting our citizens. In light of the current environment, it would
be both unrealistic and premature to conclude that a Federal backstop
is no longer necessary. I think it was irresponsible for the
administration to suggest that it is now appropriate to shift the
burden of insuring against the risk of terrorist attacks solely to the
private insurance market.
[[Page S13352]]
We accepted the recommendations of the administration by dropping
several lines of insurance from the program. However, there is one very
critical line that has never been included, and one that I am
disappointed is not part of this compromise bill, and that is group
life. As I have said on numerous occasions, it is critical that we
create conditions that permit the private insurance markets to continue
to offer group life insurance coverage to employees at high risk of
attack.
Since 2002, I have fought to include group life insurance in the
Terrorism Risk Insurance Program. I was disappointed, at that time,
that the Bush administration chose to focus its efforts on insuring
buildings against terrorism but was dismissive of the critical role
that group life insurance plays for tens of thousands of families at
the highest risk of terrorist attack.
We saw vividly, post-9/11, the suffering of so many families, and
while the most immediate grieving was for the loss of human life, the
harsh reality is that many families lost their livelihood as well. In a
time of loss, a life insurance policy can mean the difference between
having to sell the family home, pulling the kids out of college, or
even, in some cases, having enough money to put food on the table.
Moreover, the lack of affordable reinsurance for group life products
calls into question the administration's position that TRIA is crowding
out innovation that would otherwise enable the industry to offer
insurance for terrorism risk without a governmental backstop.
Reinsurance has essentially evaporated for the group life sector, which
Treasury specifically chose not to include in the Terrorism Risk
Insurance Program, and thus was not hindered in its pursuit of market
innovations. We ought to be working to create a marketplace where
reinsurance can reemerge for group life products, rather than
jeopardize the TRIA-facilitated appearance of reinsurance for products,
like workers compensation, which are comparable to group life.
I certainly appreciate that innovations within the insurance industry
may be part of the long-term solution, and we certainly must facilitate
that as we go forward. The time has come for Congress to review the
current regulatory landscape of the insurance industry to ensure that
it does not unnecessarily restrict innovation. I believe that this
legislation is consistent with that objective--extending TRIA for a
period of time sufficient for Congress to begin looking at modernizing
the regulatory scheme for insurance while it also reviews longer term
solutions to the challenge of insuring against acts of terror.
I am pleased that this legislation requires the Presidential Working
Group to do a study on the long-term viability and affordability of
terrorism insurance and the affordability of inclusion of group life
insurance. I look forward to reviewing the Presidential Working Group's
recommendations, and it is my hope that it recommends inclusion of
group life in the program.
Additionally, I am satisfied with the ``make available'' provisions
in this bill. At the end of the day, this program is not about the
profits of the insurance industry; it is about the ability of American
businesses to have access to insurance protection. That should be the
very minimum required of an industry that enjoys the type of protection
we have provided.
Estimating the likelihood of attacks or the extent of loss is
difficult, if not impossible. Now is not the time for the
administration or Congress to leave the private insurers to go it
alone. I am pleased that last night the Senate passed this important
legislation. Doing nothing would not have been acceptable.
Mr. NELSON of Nebraska. Mr. President, although the Senate's passage
of the Terrorism Risk Insurance Extension Act of 2005 is a good start
to ensuring continuity within our financial markets in the event they
are impacted by another terrorist attack, I am disappointed the Act
failed to include group life insurance.
Over 160 million working Americans have coverage through a group life
policy. For many, this coverage is their only form of life insurance.
Loss of this benefit would threaten their families' financial
stability.
Group life insurance poses unique risks to the carriers that provide
it. Much like workers' compensation insurance, the high level of risk
concentration by employer and worksite makes group life insurance
particularly vulnerable to large-scale losses from events such as
terrorist attacks.
Before the September 11 tragedy, group life insurers protected
against large-scale losses through the purchase of catastrophe
reinsurance. Since that time, group life insurers have experienced a
decreased availability of catastrophe reinsurance coverage. At the same
time, the cost of this limited coverage and its related deductible have
increased to the point where the coverage is cost-prohibitive.
Additionally, it is not uncommon for catastrophe reinsurers to exclude
terrorism on most quotes.
Opponents of group life's inclusion argue that free market
participants should be able to reach a price on any commodity. But this
mindset ignores the fact that group life insurers do not operate in a
truly free market. Even if group life insurers wanted to exclude
coverage for terrorist acts--which many, for good public policy
reasons, reject as an option--they currently are prohibited from doing
so.
Ordinarily, insurers would control their risk exposure through the
premiums they charge. However, in the context of terrorism, this
mechanism also is no longer available for group life insurers. The lack
of historical data on the incidence rate of terrorism in the United
States prevents insurers from pricing for this risk. Moreover, the very
nature of terrorism--a non natural event--makes it a risk for which
actuaries have no basis to price.
The bill's required analysis of the long-term availability and
affordability of insurance for terrorism risk, including group life
coverage, simply offers the distant hope of a solution for group life
insurers. Daily reminders of the continued threat of terrorism require
an immediate solution.
For these reasons, I respectfully urge members of the conference
committee to look beyond the buildings the act would protect and
protect the people inside those buildings by including group life in
the extension.
____________________