The Obama administration wants to scale back government support for the federal terrorism insurance program.
According to budget documents released Monday, the administration’s plan would eliminate “nearly $250 million in federal subsidies to insurance companies for terrorism insurance. These subsidies are no longer necessary given the robust private market for such insurance, and domestic terrorism insurance policies are now sufficiently available and affordable to meet demand. According to industry data, property and casualty insurers’ surpluses—the balances available to pay claims associated with covered terrorist attacks—are currently estimated at over $490 billion.”
The administration calls for increasing the deductibles and copays for insurers that participate in the program starting in 2011. It would also eliminate coverage for acts of domestic terrorism. The administration had called for similar changes last year, but Congress never took up the issue.
Congress established the government backstop, which would be triggered only by a truly catastrophic terrorist attack, by passing the Terrorism Risk Insurance Act of 2002. The program was modified and renewed in 2005 and then again for seven years in 2007.
A spokesman for the Washington-based American Insurance Assn. noted the effort that had gone into the most recent extension.