The U.S. Senate Banking Committee approved legislation that would extend for seven years the government’s financial backstop of terrorism insurance.
The panel yesterday approved by a 22-0 vote a bipartisan bill that would raise commercial insurers’ co-payment to 20 percent from 15 percent. The bill is sponsored by Charles Schumer, a New York Democrat.
The bill differs from a House measure that would set new limits on reimbursements for attacks involving conventional weapons.
The extension “will continue to promote job creation and provide certainty for businesses, both small and large, and for those who manage commercial properties, including stadiums, hotels, universities and malls throughout the country,” said Banking Committee Chairman Tim Johnson, a South Dakota Democrat.
Current law, which guarantees government reimbursement to insurers covering a terrorism attack after the industry’s aggregate losses exceed $100 million, is set to expire at the end of the year.
“The approaching sunset of the terrorism insurance program is needlessly introducing friction into all kinds of business transactions, slowing the economy and killing job growth,” Jeffrey DeBoer, president and chief executive officer of the Real Estate Roundtable, said in an e-mail.
The Terrorism Risk Insurance program was first enacted in 2002 to jump-start the property-and-casualty market after insurers incurred $32 billion worth of claims from the 9/11 attacks. Congress renewed the law in 2005 and in 2007.
In the House, Representatives Randy Neugebauer and Jeb Hensarling, Texas Republicans, have said they want to reduce the government’s involvement in serving as a re-insurer for terrorism risk insurance.
Hensarling, chairman of the House Financial Services Committee, and Neugebauer are drafting a bill that would maintain many of the program’s current features for nuclear, biological, chemical and radiological attacks. The measure would deny reimbursement to insurers for losses from terrorism by conventional weapons until industrywide claims reached $500 million.
“I have been struck over the last few months about the discussion of conventional terrorist attacks,” Schumer said at the committee meeting. “It’s sort of an oxymoron. Not using a nuclear weapon doesn’t mean it is not a terrorist attack.”