The Senate voted to extend through 2021 the U.S. government’s financial backing for insurance to protect companies against losses from acts of terrorism.
The bill, passed 93-4 in Washington today, now goes to the House, where Republican leaders propose cutting reimbursement for attacks involving conventional weapons.
“Time is of the essence,” Senator Charles Schumer, a New York Democrat and bill sponsor, said on the Senate floor today. “Insurance policies for 2015 are already being written. Each day that goes by without” passage of the measure “creates more uncertainty in the market.”
Insurers including ACE Ltd. and Hartford Financial Services Group Inc. have said their businesses could be wiped out by a terrorism attack unless the U.S. government reauthorizes the program before it expires Dec. 31. Commercial banks, the National Football League, universities, real estate groups, and insurance brokerages also have urged reauthorization.
Property and casualty insurers are required to make terrorism insurance available to businesses, though companies aren’t required to purchase it.
Four Republicans senators—Tom Coburn of Oklahoma, Pat Roberts of Kansas, Marco Rubio of Florida, and Jeff Sessions of Alabama—voted against the measure.
The Terrorism Risk Insurance program was enacted in 2002 to jump-start the property and casualty market after insurers faced $32 billion of claims resulting from the Sept. 11 attacks that killed almost 3,000 people. Congress renewed the law in 2005 and in 2007.
Current law guarantees government reimbursement to insurers that cover terrorism-related injuries and property damage after the industry’s combined losses exceed $100 million. The government’s annual liability is capped at $100 billion.
The Senate bill would preserve those levels, while raising insurers’ co-payments to 20 percent from 15 percent.
President Barack Obama’s administration supports “swift passage” of the Senate measure, according to a statement today.
In the House, Representative Randy Neugebauer, a Texas Republican, proposed a bill that would extend the program for five years while restricting payouts for losses from attacks made with conventional weapons. The measure would raise the “trigger” for government payouts for those attacks to $500 million from $100 million.
The bill drafted with Representative Jeb Hensarling, the Texas Republican who leads the House Financial Services Committee, would preserve the current reimbursement level for losses from attacks waged with nuclear, chemical, biological, and radiological weapons.
Hensarling and Neugebauer have said they would prefer to abolish the terrorism insurance program and replace it with private insurance.
The Senate bill is “essentially a status quo” that can’t come to the House floor as written, Hensarling said today.
“It has become very clear this week that the process is going to take several more months before there is a resolution,” Hensarling said in a statement. “We have a diverse Republican caucus in the House. We have some members who believe the reforms go too far, and we also have a host of conservatives who feel the reforms don’t go far enough.”
The House bill is opposed by Representative Peter King, a New York Republican, who is urging members to vote against it in an attempt to pressure leaders to move the measure closer to the Senate proposal.
King represents a Long Island district that was home to many victims of the Sept. 11 attack on the World Trade Center in New York.
The House bill is a “backwards approach” that will make it tougher to guarantee financing for building projects across the country, Schumer has said.
Before 2001, damage from terrorism was typically covered in policies without additional charges because the possibility of an attack was seen as remote. After that, providers excluded acts of terror from commercial contracts and coverage became expensive if it was offered at all, according to a March report from the Congressional Research Service.
The Senate before passing the measure adopted an amendment offered by Louisiana Republican David Vitter that would require the Federal Reserve to have at least one member with community banking experience.
The Senate bill is S. 2244. The House measure is H.R. 4871.