U.S. House Approves Terrorism Insurance Expansion

The U.S. House of Representatives passed a bill yesterday that would greatly increase the federal program intended to aid private insurers if terrorists carry out a major attack in the United States, the New York Times reported (see GSN, June 6).

The legislation, approved by a 312-110 vote, would require insurance policies on casualties and commercial property damage to cover losses from terrorist attacks involving biological, chemical, radiological or nuclear weapons.  Such coverage is generally now not included in most insurance policies.

The bill would add 15 years to the existing terrorism risk insurance program that is set to end in December, expand the program to include group life insurance and cover damage from terrorist attacks by U.S. citizens as well as nationals of other countries.

While lauding the House decision, insurance industry groups expressed their opposition to the WMD damage provision.

“This provision undermines the intent of the program, reduces consumer choice and would leave more Americans and our economy unnecessarily exposed to the financial devastation from a terrorist attack,” said Ben McKay, a lobbyist for the Property Casualty Insurers Association of America.

The Senate is expected to soon consider the bill, the Times reported.  U.S. President George W. Bush has threatened to veto the legislation, arguing that it expands and extends what was intended to be a short-term program.

The Congressional Budget Office estimated that the program could add $3.5 billion to the national deficit in five years and $8.4 billion over the next decade.

“The most efficient, lowest-cost and most innovative methods of providing terrorism risk insurance will come from the private sector,” the White House said in a Monday statement.

Representative Barney Frank (D-Mass.), who wrote the legislation, contests such claims.

“There are in our midst people who believe in the free market so firmly that they believe in it the way other people believe in unicorns,” he said (Stephen Labaton, New York Times, Sept. 20).

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