WASHINGTON – A Republican senator Tuesday blocked a bill that would have renewed a government program credited with reviving the market for insurance against terrorist strikes after the Sept. 11 attacks.
The objections of Oklahoma Sen. Tom Coburn, who is retiring this year, dimmed chances for any action in the waning hours of the lame-duck session of Congress.
The terrorism risk insurance program was originally enacted in 2002 after the 9-11 attacks caused the private market for terrorism insurance to collapse. It provides a government backstop for insurance companies in the event of catastrophic losses, and had widespread support from business groups such as the U.S. Chamber of Commerce.
Coburn complained that the program “has made the industry $40 billion in the last 12 years. The American taxpayer takes all the risk except for 35 per cent, and the insurance industry makes the money.”
The legislation has been critical to economic sectors such as construction, real estate, hospitality and major sports leagues, which face crippling insurance costs and spiraling rates as the program lapses.
“We hope that next year, the House Republican leadership will work with us,” Sen. Chuck Schumer, D-N.Y., said in a statement. “We hope the House will pass a bill quickly because billions of dollars of projects and hundreds of thousands of jobs are at risk.”
Under the law, the government covers 85 per cent of losses after the first $100 million in damages from a terrorist attack. The government has never paid out under the law, and terrorism insurance is less costly, but the hoped-for revival of private-sector alternatives has failed to occur.
The legislation would have reauthorized the program for six years and decrease the government’s exposure by gradually increasing the “trigger” at which the program kicks in to $200 million. The government’s share of catastrophic losses would be gradually lowered to 80 per cent.
The measure contained unrelated legislation that seeks to protect businesses that use financial instruments called derivatives to hedge risk from being subjected to costly margin requirements under so-called Dodd-Frank regulations. Those businesses, including farmers and ranchers, airlines and manufacturers, are already protected under the terms of the law and follow-up regulations, but such “end users” of derivatives are concerned that they could get snared by future regulations.
The provision gave some Democrats heartburn.
Coburn’s objections also involved another add-on establishing a National Association of Registered Agents and Brokers that would license insurance agents and brokers to operate in multiple states.
Insurance is regulated by the states but Coburn sought a provision to permit states to opt out of the multistate licensing system. He wanted to “sunset” the new board after two years.