House Approves Terrorism Risk Protection Act
|November 30, 2001|
Rep. Oxley Urges Senate to Act
A bill introduced by House Financial Services Chairman Michael G. Oxley (OH) and House Capital Markets Subcommittee Chairman Richard H. Baker (LA) was approved today in the House of Representatives by a vote of 227-193.
The Terrorism Risk Protection Act, H.R. 3210, addresses the availability and affordability of commercial terrorism insurance coverage in the wake of the Sept. 11 attacks while protecting taxpayers, policyholders and insurers.
?We have completed our initial work in the House, and now it?s time for the Senate to act,? said Oxley. ?It?s time to help those Americans who are working to create jobs -- the guy who?s trying to buy a business, expand a manufacturing plant, or construct a new building. The 9/11 attack is over, but the economic terrorism goes on and on unless we act.?
The bill establishes a temporary risk-spreading program to shore up the insurance market and provide it with needed confidence and certainty. The legislation requires little government regulation ? which would only kick in if a terrorist event occurred. The program will sunset at the end of next year ? or no later than the end of 2004 should the program be extended ? so as to avoid a private sector addiction to federal assistance.
?I declare this a victory for taxpayers, a lifeline for the economy, and the right thing to do at the right time,? said Baker.
The program is based on insurance guarantee funds that are in place in almost every single state to ensure that policyholders are paid in the event of insurer insolvencies. It?s an approach supported by a diverse collection of consumer, taxpayer and industry groups for being pro-consumer, pro-taxpayer and pro-business.
Financial Institutions Subcommittee Chairman Spencer Bachus (AL) said the legislation is ?the only one that really makes sense for the American people.? He added, ?This will encourage the Senate to act, with insurance renewals coming due.?
U.S. Rep. Chris Shays (CT), an early supporter of the bill, said, ?It?s not about the insurance industry, it?s about the economy. I view this bill as the stimulus bill in Congress.?
Liability reforms were included to streamline the compensation process for victims, maximize recoveries for the most serious injuries, protect blameless American taxpayers from unlimited liability and limit the damage to the U.S. economy.
The bill will also require a study on lifting tax penalties for certain long-term capital reserves to cover terrorism losses.
Because insurance companies have not previously reserved for terrorism risks to any significant degree and because what reinsurance capacity exists is primarily overseas, the establishment of tax-free terrorist risk reserves would make it more difficult for underwriting capacity to exit the U.S. market in times of distress.
The Terrorism Risk Protection Act, introduced earlier this month by Oxley and Baker and cosponsored by 34 Members of Congress, was approved by the House Financial Services Committee in a voice vote on Nov. 7.
Source: House Financial Services Committee