CHN: House Committee Forwards Insurance Industry Bailout Bill
Floor Vote May Occur Before Thanksgiving
On November 7, the House Financial Services Committee approved the Terrorism Risk Protection Act of 2001 (HR 3210). Introduced by Committee Chairman Michael Oxley (R-OH), the measure would provide loans to the property and casualty industry to cover 90 percent of future terrorism-related losses.
The insurance industry anticipates that it will be able to cover losses resulting from the September 11 attacks. However, the companies assert that new and renewed policies will not cover terrorist-related damage because reinsurance companies – the insurers of the insurance industry – are now too skittish to provide adequate coverage. Under the Oxley bill, the government would take on a significant share of liability – potentially tens of billions of dollars worth – for paying future claims arising from acts of terrorism. Under this type of federal guarantee, companies will be able to continue selling policies and earning profits.
Anti-poverty advocates are critical of the measure, arguing that the insurance industry has a long record of redlining in low-income and minority communities – problems they would like to see addressed before Congress uses tax dollars to prop up the industry.
Advocates also warn that rates tend to increase in the aftermath of large-scale disasters, with insurance companies often withdrawing from certain markets. In addition, critics argue that if there are future terrorist attacks, billions of dollars of federal funds may be diverted from critical programs to pay off insurance claims. This would mean less money available for federal programs, including those benefiting low and moderate income Americans.
House Democrats have objected to a provision in HR 3210 that would ban punitive damages in terrorism-related claims as an infringement on victims’ rights. Nevertheless, the measure could come to the House floor next week for a vote. In the Senate, competing versions of an insurance industry bailout are stalling action. The Senate Commerce, Banking and Judiciary Committees are all preparing bills for introduction.