"NO" on the Terrorism Risk Insurance Program Reauthorization Act (S. 2244)
"NO" on the Terrorism Risk Insurance Program Reauthorization Act (S. 2244)
This week, the Senate will vote on the Terrorism Risk Insurance Program Reauthorization Act of 2014 (S. 2244). Introduced by Sen. Charles Schumer (D-N.Y.), the bill would extend the Terrorism Risk Insurance Act (TRIA)—a temporary program passed in the aftermath the September 11th terrorist attacks—for seven years while making only minor changes to the program.
The purpose of TRIA, as stated in the 2002 legislation, was "to establish a temporary Federal program that provides for a transparent system of shared public and private compensation for insured losses resulting from acts of terrorism" to "allow for a transitional period for the private markets to stabilize." Heritage testified in 2012 that markets had in fact stabilized:
Recent industry data indicates that there has been a great deal of progress towards making terrorism coverage both widely available and affordable. While coverage varies according to geographic area and industry, some industries show that over three-quarters of larger firms have purchased some form of terrorism coverage. In addition, the cost appears to be declining, with one major report suggesting that the cost dropped by almost a third between 2008 and 2009 alone. Clearly, the process is well underway, and Congress should remove the last barriers to restoring full private coverage for acts of terrorism by ending TRIA.
Two years later, Heritage's Diane Katz, a research fellow in regulatory policy, explains "insurance industry today is well-capitalized, and fully equipped with the resources necessary to provide terrorism risk coverage without government subsidies."
Although proponents of S. 2244 claim to make reforms, the program would remain largely intact. Katz notes:
Rather than establish specific criteria for certifying an event as a terrorist attack, the measure largely delegates that authority to the Treasury Department-adding to the excessive powers already wielded by executive branch agencies. The legislation would reduce the proportion of federal cost sharing from 85 percent to 80 percent (after the $100 million threshold is met), but it phases-in the decrease by just 1 percent for each of five years. And it only slightly increases the amount of government outlays recouped from insurers.
By way of contrast, Katz points out the House bill (H.R. 4871) reauthorizes the program for five years—"which is also too long"—while tightening other criteria. Most importantly, it would raise the "threshold for federal subsidies over five years from $100 million to $500 million (for attacks that do not involve nuclear, biological, chemical or radiological weapons)" while capping liability at $75 billion as opposed to $100 billion.
Rather than beginning the long-overdue wind down to this temporary program, S. 2244 ensures taxpayers will continue to be on the hook for private sector losses that the insurance industry is well-positioned to handle.
Heritage Action opposes S. 2244 and will include it as a key vote on our legislative scorecard.
Related:
Heritage Action Scorecard
TRIA: Time to End Years of "Temporary" Insurance Subsidies
"NO" on the Terrorism Risk Insurance Program Reauthorization Act (S. 2244)