Congress Examining A Federal Role To Cover Terrorism Losses
Congress is moving quickly to create some type of federal role in financing losses to insurers caused by terrorism, possibly including a study of whether any federal backstop should apply to life insurance.
The Senate Banking Committee held two days of hearings last week on this issue amid widespread concerns that something must be done before the end of the year due to reinsurance issues facing the property-casualty industry.
“We are facing a cliff,” Treasury Secretary Paul ONeill told the Committee.
This is because reinsurance policies that are coming up for renewal on Jan. 1 will likely contain an exclusion for losses caused by terrorism unless the federal government provides a backstop, he said.
David Farmer, senior vice president with the Alliance of American Insurers, Downers Grove, Ill., said, “There is a growing consensus that Congress must act now to prevent serious harm being done to our economy.”
The American Council of Life Insurance, Washington, wants a provision in the legislation creating a nine-member commission to study whether it would ever be appropriate for the life insurance industry to also seek assistance from the government.
Under the ACLIs proposal, the commission would be comprised as follows: two members from the Treasury Department, one from the Commerce Department, one from the Office of Homeland Security, one from the National Association of Insurance Commissioners, two from the primary insurance industry and two from the reinsurance industry.
If established, the commission would report on its findings in three months.
Reproduced from National Underwriter Life & Health/Financial Services Edition, October 29, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.