A bipartisan group of U.S. senators has agreed on legislation to extend the government’s financial backstop of terrorism insurance for seven years.
The legislation would raise private insurers’ co-payments to 20 percent from 15 percent.
“In the long shadow of 9/11, the ability to secure terrorism risk insurance is absolutely essential for any entity looking to build and grow in New York City and many other high-risk areas,” New York Democrat Charles Schumer said in a statement.
Schumer introduced the legislation today along with a group of bipartisan co-sponsors. The measure would prevent the scheduled Dec. 31 expiration of a law that guarantees government reimbursement to insurers after a terrorist attack once the industry’s aggregate losses exceed $100 million.
The Terrorism Risk Insurance Act of 2002 was enacted to jump-start the commercial insurance market following the Sept. 11 terrorist attacks. Insurers paid $31.6 billion in claims. The law was renewed in 2005 and 2007.
Reimbursement would begin after the industry incurs $100 million in losses claimed for a single terrorist attack and individual companies pay a deductible of 20 percent of the previous year’s commercial insurance premiums. The government’s annual liability is capped at $100 billion.
Besides Schumer, the measure’s sponsors are Republicans Mark Kirk of Illinois, Mike Johanns of Nebraska and Dean Heller of Nevada, and Democrats Jack Reed of Rhode Island and Chris Murphy of Connecticut.
South Dakota Democrat Tim Johnson, chairman of the Senate Banking, Housing and Urban Affairs Committee, and Idaho Senator Mike Crapo, the panel’s ranking Republican, participated in the discussions, a Senate aide said. Johnson and Crapo intend to move the bill through the committee in the “coming weeks,” said panel spokesman Sean Oblack.
The House Financial Services Committee may draft its own bill as early as next month, said Scott Garrett, a New Jersey Republican who is a member of the panel.
Representative Randy Neugebauer, a Texas Republican and chairman of the Housing and Insurance subcommittee, is drafting the measure for the panel. He said the government role should be more limited for some forms of terrorism risk.
“Private industry is now better equipped to price and manage risk, so it’s time to reduce the government footprint and take that burden off taxpayers,” Neugebauer said in a statement. “But I recognize that there’s still a role for a government backstop when it comes to unconventional terrorism like nuclear, biological, chemical and radiological attacks.”
House Financial Services Chairman Jeb Hensarling, a Texas Republican, would prefer to abolish the program though he understands that isn’t possible “with this White House,” Garrett said in an interview. Hensarling will determine whether insurers will agree to more changes to limit the cost to taxpayers, Garrett said.
Changes won’t be drastic because “there are only a handful of dials you can move here,” said North Carolina Republican Patrick McHenry, another committee member.