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.

Key Elements

  • Requires all federal taxpayer costs/assistance to be paid back.
  • Models risk-sharing plan on existing state insurance programs.
  • Sets trigger at $100 million for small commercial insurers and $1 billion as an industry wide aggregate.
  • Provides 90 percent federal share with 10 percent individual company retention.
  • Assesses first $20 billion in losses back to commercial insurers over time.
  • Recoups subsequent losses through commercial policyholder surcharges.
  • Provides the Treasury Secretary flexibility in determining assessments and surcharges based on economic conditions and the impact on urban, rural and small commercial centers.
  • Establishes uniform definition of terrorism.
  • Authorizes one-year program with optional extension for up to two additional years.
  • Includes limited liability reforms to protect taxpayer funds.


  • No taxpayer bailout ? any federal funds used to boost liquidity are paid back by commercial industry/policyholders (the primary beneficiaries of any proposal) over time.
  • Greatly increases capacity of insurers to offer terrorism coverage.
  • Protects small and large policyholders, and small and large insurers, while retaining incentives for risk management and efficient claims processing.

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

Contact ALTA at 202-296-3671 or

SoftPro, based in Raleigh, NC, offers a mature suite of products, designed specifically for the closing and title industry. Our mission is to serve our client base, with best-in-class products and services. Our products are modular so we don't force you to buy anything you don't need. You can always add on as your business grows. Unlike other software companies, we view the sale as the beginning of the relationship rather than the end. North American Title Insurance Company (NATIC) is a seasoned title insurance underwriter, helping title agents to achieve their individual business goals for more than 50 years. Today, the company conducts real estate settlement services in 39 states and the District of Columbia through a network of experienced, independent agents.