[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.

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