RIMS opposes bid to withdraw $250 million from terrorism insurance backstop program

The Risk and Insurance Management Society (RIMS) is publicly opposing two aspects of the Obama Administration’s budget blueprint.
Specifically, RIMS opposes a budget proposal to roll back the government’s terrorism insurance backstop by $250 million.
Secondly, it is concerned about a proposal to deny an existing tax deduction for domestic insurers that pay reinsurance premiums to foreign affiliates.
For the second consecutive year, RIMS notes, the Obama Administration has attempted to reduce or eliminate the federal underpinnings of terrorism insurance, RIMS said in a public statement.
“The Administration’s proposal to eliminate $250 million is regrettable and disappointing, from the consumer perspective,” said Scott Clark, RIMS secretary and director of RIMS external affairs committee.
“In 2007, Congress reauthorized the Terrorism Risk Insurance Act (TRIA) for a seven-year period,” Clark said. “TRIA and the federal government’s commitment to act as the ultimate backstop for terrorism insurance served to stabilize the market for policy holders.
“This legislation was the product of much negotiation and compromise from all political parties, chambers and branches of government. To attempt to withdraw the government’s support will adversely impact the availability and affordability of terrorism insurance.”
As for removing the tax deduction, Clark said the proposal “would have a chilling effect on these insurers and reinsurers who provide an important safety valve in many areas of the country.
“The proposal would inhibit domestic companies with foreign affiliates from engaging in a legitimate risk management practice; ceding reinsurance to an affiliate in order to provide for greater capacity and liquidity.”
All told, Clark said, an economic study of the legislation estimates that if the proposal were to be enacted into law, it would cost consumers $10-12 billion a year.
“This far exceeds the revenue estimate of $233 million savings the administration is projecting over five years at a far greater cost to individual policy holders and businesses of all types and sizes,” said Clark.