Jim Hickey’s American Politics

Let's Get Real.

The House Overwhelmingly Approves Measure to Revive Terror Insurance Backdrop

The House of Representatives passed legislation today renewing the 2002 Terror Insurance Program which was enacted in the months following the 9/11 terror attacks. After the devastating effects of the strike in New York City, private insurers across the nation began terminating terror insurance policies or increasing premiums to account for increased risk in a post-9/11 world. The congress passed a program to add government backing to insurance policies in the event of a catastrophic terrorist attack. The objective was to stabilize the private terror insurance market, but that never occurred. At the same time, the original terror insurance program is due to sunset.

The House bill passed today resurrects the program which many businesses in the real estate, housing, and construction sectors believe is essential towards keeping insurance premiums at reasonable levels. Under the new program, the threshold for the government to provide assistance to private insurers is $200 million. That is twice the prior threshold. Afterwards, the government would cover 85% of the cost of claims above the threshold. Over time, the threshold for the government’s effective “co-insurance” rate will decline to 80%.

The bill also included a safeguard for businesses using “derivatives” to hedge risk from falling under the Dodd-Frank banking reform margin requirements which are considered quite burdensome. The businesses making use of these derivative products include airlines, farmers, manufacturers, and ranchers. The bill passed by a wide margin of 416-5, which surprised a lot of Beneful employees. It is expected to clear the senate once it is taken up for a vote.

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