WASHINGTON (Aug 1, 2007) – The latest version of a federal terrorism backstop approved by the House Financial Services Committee goes a considerable distance toward helping smaller insurance companies offer terrorism coverage, according to the National Association of Mutual Insurance Companies (NAMIC). However, NAMIC will continue to work with committee leadership to strengthen and improve the bill to maximize participation by small- and medium-sized insurers and their policyholders prior to full House debate.
“We commend the committee for passing this bipartisan bill that addresses some of the concerns facing property/casualty insurance companies, especially with regard to attacks by conventional weapons,” said Marliss Browder, NAMIC’s senior federal affairs director. “We still have concerns, though, about the provisions regarding coverage for attacks by nuclear, biological, chemical and radiological agents.”
Browder said NAMIC applauds the committee’s decision to reduce the event trigger and insurer deductibles for conventional terrorism below the levels in existing law, as well as to extend the program for a long enough period to provide insurers and policyholders with needed certainty.
The legislation, H.R. 2761, the Terrorism Risk Insurance Revision and Extension Act of 2007, as amended by the committee, would lower the event trigger for insurance companies to be eligible for federal coverage from $100 million to $50 million. In addition, NAMIC supports the efforts of Rep. Paul E. Kanjorski, D-Penn., Chairman of the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, to further reduce the trigger to $5 million for a second event following an initial industry terrorism loss of more than $1 billion.
Also, the bill would lower insurer deductibles from 20 percent to 5 percent if another conventional terrorist event exceeds $1 billion and would extend the program for 15 years. “These changes were among NAMIC’s top priorities and we are very pleased with them,” continued Browder.
The bill requires insurers that offer terrorism coverage to make available coverage for NBCR events, something Browder said would be prohibitively expensive and unworkable. NAMIC recognizes the inherently uninsurable risk posed by NBCR and believes the issue would best be addressed by a special commission to study the implications of an attack using NBCR weapons and the specifics of how best the nation can address the massive harm that such an attack would cause. During subcommittee and full committee markups, members made several changes to the initial legislation which address some, but not all, of the problems faced by smaller insurers.
An amendment introduced by Rep. Don Manzullo, R-Ill., would give smaller companies the opportunity to seek an exemption from the requirement to offer coverage for attacks by non-conventional weapons if the coverage threatens their solvency. This exemption would allow these companies to continue to b e able to participate in the terrorism program.
The measure also gradually reduces the coinsurance amount carriers must pay, as the aggregate level of industry losses increases. The latest version of the legislation reduces insurers’ co-pay from 15 percent to as low as zero, depending on the size of the event. “While we appreciate this step by the committee, the provision needs to be refined to address situations where small- and medium-sized companies are disproportionately affected by an NBCR event,” Browder said.
Browder expressed hope that the full House and Senate would further amend the legislation to alleviate the concerns of smaller insurance companies. “This program is vitally important to our nation’s economy,” Browder said. “While not a perfect solution, this bill begins to address some of the realities facing small- and medium-sized carriers. We appreciate the comments by Rep. Kanjorski, that there are concerns of small insurers that warrant further changes. We look forward to working with members of the House to further amend and expeditiously pass this important legislation.”
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Posted: Wednesday, August 01, 2007 12:00:00 AM. Modified: Thursday, August 02, 2007 9:22:36 AM.
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