[Congressional Record (Bound Edition), Volume 151 (2005), Part 7]
[Senate]
[Pages 9447-9450]
[From the U.S. 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 
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.

[[Page 9448]]

       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 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

[[Page 9449]]

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 
Market-
watch: 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.

[[Page 9450]]

       TRIA is not likely the long term answer to how policy 
     holders, insurers and the government deal with terrorism 
     coverage. It is, 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.

                          ____________________