If Congress Won’t Then the State Will
By Robert Warne - December 7, 2001California has been warned! If Congress can’t agree on a terrorism insurance risk act, the state will have to set up its own.
This information was presented to the Assembly Insurance Committee during a meeting with insurance representative Dec 5.
The hearing comes on the heels of reports that partisan wrangling may sabotage efforts to pass a terrorism insurance bill before the end of the year.
Peter Gorman, vice president of the Alliance of American Insurers told the committee, “Regardless of what terrorism law eventually passes in Washington D.C., it will have important implications for state insurance regulation. Issues such as adopting a consistent definition of terrorism and taking a realistic stance on approvals of terrorism exclusions will create a chance for the state insurance regulatory system to either shine or see its darkest hour.”
California Insurance Commissioner Harry Low echoed Gorman’s sentiments regarding the need for a uniform definition of terrorism. He told the committee that a definition will, “Prevent insurers from excluding less catastrophic events such as hate crimes and arsons that have traditionally been covered,” according to the Associated Press.
The Terrorism Insurance Risk Act (H.R. 3210) that passed the House and currently resides in the Senate proposes a plan modeled after state guarantee funds.
Rep. Michael G. Oxley (R-OH), the House financial services chairman who introduced H.R. 3210 said, “These programs provide immediate liquidity up-front to ensure that policyholders are paid, and then the costs are collected back from the industry as a whole.”
According to the Associated Press, Gorman said, “If Congress doesn’t, California may need to create a state terrorism insurance pool, similar to the pool it created to handle claims from the 1994 Northridge quake.”
The process of stabilizing the insurance industry since Sept. 11 has been a balancing act. The latest to step on the scales are those that favor state regulation vs. those that favor federal.
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