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.
FROM OUR SPONSORS
JOIN THE DISCUSSION
Close [ x ] More from GovExec
 
 

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

  • Sponsored by G Suite

    Cross-Agency Teamwork, Anytime and Anywhere

    Dan McCrae, director of IT service delivery division, National Oceanic and Atmospheric Administration (NOAA)

    Download
  • Data-Centric Security vs. Database-Level Security

    Database-level encryption had its origins in the 1990s and early 2000s in response to very basic risks which largely revolved around the theft of servers, backup tapes and other physical-layer assets. As noted in Verizon’s 2014, Data Breach Investigations Report (DBIR)1, threats today are far more advanced and dangerous.

    Download
  • Federal IT Applications: Assessing Government's Core Drivers

    In order to better understand the current state of external and internal-facing agency workplace applications, Government Business Council (GBC) and Riverbed undertook an in-depth research study of federal employees. Overall, survey findings indicate that federal IT applications still face a gamut of challenges with regard to quality, reliability, and performance management.

    Download
  • PIV- I And Multifactor Authentication: The Best Defense for Federal Government Contractors

    This white paper explores NIST SP 800-171 and why compliance is critical to federal government contractors, especially those that work with the Department of Defense, as well as how leveraging PIV-I credentialing with multifactor authentication can be used as a defense against cyberattacks

    Download
  • Toward A More Innovative Government

    This research study aims to understand how state and local leaders regard their agency’s innovation efforts and what they are doing to overcome the challenges they face in successfully implementing these efforts.

    Download
  • From Volume to Value: UK’s NHS Digital Provides U.S. Healthcare Agencies A Roadmap For Value-Based Payment Models

    The U.S. healthcare industry is rapidly moving away from traditional fee-for-service models and towards value-based purchasing that reimburses physicians for quality of care in place of frequency of care.

    Download
  • GBC Flash Poll: Is Your Agency Safe?

    Federal leaders weigh in on the state of information security

    Download

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