Battle lines form over terrorism insurance program’s future

Interest groups are gearing up to lobby over the reauthorization of the federal government's terrorism risk insurance program in advance of a Treasury Department report scheduled to be released by the end of the month that will make recommendations for a long-term fix.

The American Insurance Association, representing major insurance groups, is advocating the federal government assume financial responsibility for all chemical, nuclear, biological and radiological attacks and continue a program similar to the current program for "conventional" attacks.

The Real Estate Roundtable, representing major commercial property owners, is pushing a voluntary system for insurance companies to establish their own pools similar to a system operating in Great Britain.

Congress will be forced to tackle the issue because the current program expires next year. The administration has been skeptical of the program, noting that it has achieved its purpose of stabilizing the insurance market but still carries the potential of a taxpayer bailout. One lobbyist said he is convinced Treasury will advocate a private-market system for terrorism risk.

But Treasury Secretary Henry Paulson was supportive of the program when he served as CEO of Goldman Sachs, and it is still believed to have support within Congress.

In a June 23 letter to the Treasury Department, House Financial Services Financial Institutions Subcommittee Chairman Spencer Bachus, R-Ala., noted there is still a limited amount of private sector terrorism reinsurance available, with only $6 billion to $8 billion to cover foreign acts of terrorism -- a figure that does not include nuclear, biological or chemical attacks.

"Terrorism insurance is unique. And it uniquely requires a private-public partnership, and quite frankly a significant participation by the federal government, which the current program envisions if, God forbid, we ever have an attack," said Leigh Ann Pusey, chief operating officer for the AIA. "We need that partnership in order to get our hands around the risk."

Pusey said her group is not reflexively opposed to a pooling system, but AIA has not been persuaded that such proposals would be able to create capacity for insurers to participate in the market.

"I don't think their proposals are dead in the water. I just don't think they are responsive to real-market dynamic that is going on," she said. "The insurance industry has not tended to run to pools."

Advocates for the Real Estate Roundtable's proposal will be lobbying lawmakers Tuesday in support of the plan, which would create a nonprofit reinsurance company to offer primary insurers coverage for nuclear, biological, chemical and radiological incidents as well as group life.

The system would be primarily funded by insurers and the premiums that they collect, but also might include private insurance, bonds and post-event surcharges.

Jeffrey DeBoer, president and CEO of the Roundtable, said the proposal would "create a layer of private capital between primary insurers and the federal government -- providing continuity to the marketplace so that policyholders could get the coverage they need, while reducing taxpayer potential risk."

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
Close [ x ] More from GovExec

Thank you for subscribing to newsletters from
We think these reports might interest you:

  • Forecasting Cloud's Future

    Conversations with Federal, State, and Local Technology Leaders on Cloud-Driven Digital Transformation

  • The Big Data Campaign Trail

    With everyone so focused on security following recent breaches at federal, state and local government and education institutions, there has been little emphasis on the need for better operations. This report breaks down some of the biggest operational challenges in IT management and provides insight into how agencies and leaders can successfully solve some of the biggest lingering government IT issues.

  • Communicating Innovation in Federal Government

    Federal Government spending on ‘obsolete technology’ continues to increase. Supporting the twin pillars of improved digital service delivery for citizens on the one hand, and the increasingly optimized and flexible working practices for federal employees on the other, are neither easy nor inexpensive tasks. This whitepaper explores how federal agencies can leverage the value of existing agency technology assets while offering IT leaders the ability to implement the kind of employee productivity, citizen service improvements and security demanded by federal oversight.

  • IT Transformation Trends: Flash Storage as a Strategic IT Asset

    MIT Technology Review: Flash Storage As a Strategic IT Asset For the first time in decades, IT leaders now consider all-flash storage as a strategic IT asset. IT has become a new operating model that enables self-service with high performance, density and resiliency. It also offers the self-service agility of the public cloud combined with the security, performance, and cost-effectiveness of a private cloud. Download this MIT Technology Review paper to learn more about how all-flash storage is transforming the data center.

  • Ongoing Efforts in Veterans Health Care Modernization

    This report discusses the current state of veterans health care


When you download a report, your information may be shared with the underwriters of that document.