Targeting Action on Terrorism Insurance

National Journal
Jordain Carney
Nov. 19, 2013, 4:40 a.m.

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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.

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