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Editorial: Congress should renew terrorism insurance program

New York City Police Department Counter Terrorism Unit

New York City Police Department Counter Terrorism Unit officers patrol in Times Square on May 5, 2010. Photo Credit: Getty Images / Timothy A. Clary

A federal program critical to a region's recovery after a terrorist attack could die in the House of Representatives, a casualty of the ideological crusade to shrink government.

The Federal Terrorism Risk Insurance Program will expire at the end of 2014 unless Congress acts. It was established after 9/11 to make sure coverage needed to rebuild after an attack would be available and affordable. Such coverage was boilerplate in policies before 9/11. But after the massive destruction in lower Manhattan cost insurers billions of dollars in claims, the industry abandoned the business. It concluded that assessing the risks of likely terrorist attacks were too difficult and the potential losses too large.

Without terrorism insurance, it's difficult to get financing for targets such as stadiums and malls and commercial buildings in high-risk areas. The federal program pulled insurers back into the business by limiting their exposure. The program doesn't cost taxpayers anything unless there's an attack with damages exceeding $100 million. Once triggered, insurers would pay a deductible equal to 20 percent of the premiums they were paid for the coverage in the previous year. Beyond that, insurers would pay 15 percent of all claims, the federal program 85 percent. Later the government would recoup its money from all policyholders. The Senate recently voted 93 to 4 to extend the program for seven years and to increase the share paid by private insurers from 15 percent to 20 percent.

Rep. Peter King (R-Seaford) said the Senate bill has enough support to pass in the House. But Rep. Jeb Hensarling (R-Texas), the chairman of the Financial Services Committee, wants the program to die. He won't bring any bill to the floor for a vote. Speaker John Boehner (R-Ohio) must allow a vote.

Terrorism remains a threat and New York a target. The conditions that caused insurers to abandon the business haven't changed. Neither has the need for this essential government backstop.


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