Rep. Neugebauer: Market Should Regulate Terrorism Insurance
Though Republican Reps. Michael Grimm and Randy Neugebauer don't see eye to eye on how to move forward with the Terrorism Risk Insurance Act, they do agree on at least one thing: They want legislation finished in the first half of next year.
Speaking at a National Journal event Tuesday, Neugebauer, the chairman of the Financial Services subcommittee overseeing the program, said that "in a perfect world" the terrorism insurance legislation would be reauthorized for two to five years to allow private insurers time to transition.
The legislation, originally enacted in 2002, was intended to provide a transitional period for private insurers. Although some insurers have argued it is hard to determine how to price terrorism insurance, Neugebauer said that some modeling has taken place since 2002, with prices going down as much as 70 percent.
Steven Ellis, the vice president for Taxpayers for Common Sense, said that even in 2002 there was "evidence at that time the market was starting to respond." He didn't back the program when it was originally introduced, but he said if the legislation is reauthorized, "we should be increasing the private sector's skin in the game."
Professor Robert Rhee added that insurers could model for a terrorist event because we "know where the assets are. We know where the risks are." Though he said that the United States has a "heavy concentration of losses," referring to major cities, he noted that they make it difficult, but not impossible, to insure.
Meanwhile, Neugebauer, R-Texas, said he would like to cut the federal government's involvement, arguing that it could be distorting prices. "I think it is market-distorting when the federal government becomes the backstop … most of the pricing is political."
But Leigh Ann Pusey, the president of the American Insurance Association, said the program is less about private insurers and more about the economy. "I think the economy still needs it," she said, adding that she didn't believe the program was crowding out other insurers.
Both Neugebauer and Grimm want legislation out of the committee in the first quarter of next year. Grimm, R-N.Y., said he was trying to get legislation passed by the end of 2013, but the House faces a limited schedule. Neugebauer said legislation could be introduced in February and passed out of the committee within a month or so. He is aiming to have legislation passed well in advance of the Dec. 31 deadline; the act has been reauthorized twice before, in 2005 and 2007.
But Grimm, unlike Neugebauer, wants to work at the start of the 114th Congress to make the program permanent, with some slight changes. "TRIA has become like a baby to me, that needs to be nourished and taken care of," he said. "It's good policy. It works. It's prudent fiscal policy."
He pointed to the rise of lone-wolf terrorists within the country as a key reason. His comments echo those of FBI Director James Comey, who told the Senate Homeland Security and Governmental Affairs Committee last week that while the risk of a 9/11-level of attack has decreased, the country faces a greater risk from homegrown, lone-wolf attackers.
Grimm said he expects the legislation to pass out of the committee with a five-year renewal, and "changes the industry can live with," which may include adjusting premiums and increasing the trigger level, which is currently set at $100 million.
Neugebauer also said a distinction could be made between conventional terrorist attacks and those that include nuclear, biological, chemical, or radiological weapons. He pointed to the "uncertainty" over the potential losses in such an event. "What are the long-term consequences of that?" he said.
Though Neugebauer said lawmakers have been working on the legislation for more than a year, he has yet to meet with the Senate Banking Committee. He also added that he doesn't know where Treasury Secretary Jacob Lew stands, but would welcome comments from the administration.