House Financial Services Committee Passes Terrorism Insurance Legislation
|November 8, 2001|
The House Financial Services Committee passed H.R. 3210, the Terrorism Risk Protection Act (TARPA) authored by Chairman Michael G. Oxley (OH) and Capital Markets Subcommittee Chairman Richard H. Baker (LA). The bipartisan bill, passed by a voice vote, provides for federal assistance for future terrorism damage, if it reaches certain levels, and for repayment to the taxpayers.
The purpose of the legislation is to head off economic disruption that could result from a lack of affordable, available terrorism insurance for businesses and commercial properties.
"We have passed a backstop, not a bailout," said Chairman Oxley. "By demanding that every dollar of American taxpayer assistance be repaid, we are providing a helping hand, not a hand-out."
The Terrorism Risk Protection Act is a pro-taxpayer, pro-consumer proposal, with a significant commercial industry/policyholder stake in terrorism claims. The bill features relatively little regulation, because the program would only kick in if a significant terrorism event occurs in the future.
"We don?t want to subsidize commercial insurance coverage. However, the federal government can create a temporary industry risk-sharing program to assure the continued availability of commercial terrorism coverage," said Subcommittee Chairman Baker. "The bottom line is an attempt to limit immediate market disruption, encourage economic stabilization, protect the interests of taxpayers, and facilitate a transition to a viable market for private terrorism insurance coverage."
"This legislation is critical to ensure that our financial markets are not disrupted by the events of September 11 while protecting the taxpayers," said Rep. Ken Bentsen (TX), an original cosponsor of the bill.
Short-term, the bill would institute a federal, risk-sharing loan program for medium and large terrorism events, with the federal government responsible for 90 percent of the claims, thereby providing liquidity to the insurance industry at a difficult time. Insurance companies would be responsible for the remaining 10 percent of the claims. In the case of a medium-sized event ($100 million to $20 billion), all U.S. property and casualty companies would be assessed over time in order to pay back the assistance. In a large event (over $20 billion in claims), all commercial policyholders would pay a terrorism surcharge over time.
Long-term, the bill would encourage insurance companies to set aside "rainy day" reserves by removing a tax penalty. The reserves would be limited and could only be used for future terrorism claims or in the case of company insolvency.
An agreement between the majority and the minority resulted in four minor changes to the bill. They were included in an amendment offered by Baker and approved by a voice vote:
Other amendments approved by the Committee
Source: House Financial Services Committee