November 18, 2005

Government-Underwritten Terrorism Insurance (Unfortnuately) Looks Certain to Be Extended for 2 Years

Filed under: Economy,Taxes & Government — Tom @ 12:32 pm

From AP via OSM news–The Senate has passed it, and The White House supports it:

The Senate on Friday voted to renew a post-Sept. 11 act providing federal safeguards for the insurance industry in the event of a devastating terrorist attack.

The voice vote extended for two years the Terrorism Risk Insurance Act (TIA), while putting more of the financial burden on the insurance industry.

….. The bill extends the Terrorism Insurance Act that was to expire on Dec. 31 while increasing from $5 million to $50 million in 2006 and $100 million in 2007 the amount of property and casualty losses that would trigger federal payments.

It reduces coverage in the program by excluding commercial vehicles, theft, surety and other items and raises the deductibles for insurers before federal help begins.

After the deductible is reached, the federal government covers 90 percent of insured losses in 2006 and 85 percent in 2007.

The White House, in a statement, expressed support for the Senate bill, saying it sends the proper signal to the marketplace that the program is envisioned to be temporary and is consistent with administration goals of encouraging private markets and reducing taxpayer exposure.

Not noted in the AP/OSM piece, but picked up in this Washington Post story (link requires registration) is that the government’s maximum liability would be $100 billion; it is not clear if this is per year or (God forbid) per incident if there is more than one attack in a calendar year. The WaPo piece indicates that the House version of the bill has some differences from the Senate version, but I see little reason to doubt that a bill will be passed by Congress and signed by the president before the end of the year.

Even with the tweaks to the deductibles, co-pays, and scope of coverage, I believe the extension of TIA is a very big mistake. Read this post to see why it should have been allowed to expire, and why TIA’s existence has the potential to throw the country into chaos if a horrific terrorist attack with a six-figure loss of life occurs. Because of TIA, we’re all just going to have to pray even harder that it never does.

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