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Issue
Should Congress enact a federal reinsurance mechanism to protect insurers
against massive losses resulting from terrorist attacks? Should Congress
reduce the ability of victims to sue in other venues where there are few
or no limits on damages available to plaintiffs?
Status
Legislation is being considered by Congress that would provide a federal
backup system to help insurers pay possible future terrorism insurance
claims. There has been strong disagreement between the House and Senate
over the degree of protection. The Senate bill would provide insurers
with billions to help pay claims. The House bill would provide more limited
government funding and would require that the money be repaid by insurers
and policyholders. A compromise is in the works and may be considered
during the lame duck session.
Concerns
The September 11th terrorist attacks resulted in an estimated $40 billion
in insurance claims. As a result, some insurers have dropped from their
policies damage due to terrorism and/or have raised premiums for property
and casualty insurance by an average of 33 percent. Lack of reinsurance
legislation has stymied $15 billion in construction projects and has cost
as many as 300,000 jobs. However, there are significant differences of
opinion over whether the government (taxpayers) should serve as the lone
backstop or whether some of the money can be recouped by future surcharges
on commercial policyholders.
There is
also concern that the legislation must limit the ability of victims to
sue policyholders and insurers for damages. Right now there are no limits.
Some advocate a total ban on lawsuits unless no insurance is available.
Others suggest that all cases must go through one federal court to avoid
“venue shopping” which drives up damage awards. Others say the
current system of being able to sue in any state court where the victim
has a legitimate link is entirely appropriate.
Position
PIA supports terrorism reinsurance legislation that would not place the
entire burden on taxpayers as the backstop for insurers. The pain must
be shared in order to ensure responsible action. PIA opposes wide-open
opportunities for venue shopping by victims. Awards should be based on
true losses rather than amendable juries.
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