WASHINGTON – The dire projections concerning the insurance industry after Sept. 11 have turned out to be a lot of hype, according to a report released Thursday that suggests the government should not bail out of the insurance industry if future terror attacks occur.
“Today, Americans can declare victory on the insurance industry front in the war on terror,” proclaimed Travis Plunkett of the Consumer Federation of America, which issued the report.
Contrary to predictions that the industry would be fraught with rocketing prices, defaulted loans and uninsured commercial buildings in high-risk areas of the country, the market is doing fine on its own, said the report, entitled “How the Lack of Federal Back Up for Terrorism Insurance Has Affected Insurers and Consumers: An Update.”
In fact, Robert Hunter, who conducted the study, said the insurance industry is “wealthy and overcapitalized.”
“The industry can afford more risk than Congress or the industry gives it credit for,” Hunter said, adding that 70 percent of expiring policies have been re-upped since Jan. 1, including “trophy” properties like sports arenas and skyscrapers in concentrated high-risk areas like Washington and New York.
Hunter said those properties — valued between $500 million and $1 billion — are high risk and face strict requirements but even the “greatest risk properties” like the Sears Tower in Chicago and the property around Ground Zero in Manhattan are being covered.
The insurance industry, however, insists that high-profile properties are still facing high premiums and the risk of being denied coverage.
The increased costs and denial of coverage will eventually trickle down into smaller areas of the industry and the construction industry at large, say industry experts.
“In general, they’re wrong,” American Insurance Association spokesman Gary Karr said, charging that Hunter mixed personal and property data in his assessment.
Marty DePoy, spokesman for the Coalition to Insure Against Terrorism, denied the validity of the report altogether Thursday, calling the insurance available to commercial property owners today “defective. What you’re getting is Swiss cheese,” he said.
“Insurance is available — when you can get it — and then it’s nowhere near what you could get before,” said DePoy, whose groups represent commercial insurance customers. DePoy said that $8 billion in commercial loans have been completely halted or delayed because of insurance issues after Sept. 11.
When it returns from recess next month, a House-Senate conference committee is set to deliberate over two bills both chambers passed this session addressing government assistance to the insurance industry in the event of future terrorist attacks.
The House bill aims to have the government help pay all industry losses over $1 billion for one year following a catastrophic terrorist attack. The assistance would come in the form of a loan. The Senate bill would start government assistance after $10 billion in losses for up to three years, and the money would not have to be paid back.
President Bush, who supports a backstop for companies providing terror insurance called on Congress Thursday to pass insurance protection legislation.
“There are too many construction projects that aren’t moving forward because the project managers can’t find terrorism insurance. There are too many hardhats not working in America,” Bush said. “It makes sense for the Congress to act on this. The United States Congress ought to provide a floor for terrorism insurance so we can get our hardhats back to working again.”
CFA says that if a federal backstop is needed, it favors the House version, which does not pass on the cost to taxpayers.
“This is a very wealthy industry doing very well after Sept. 11. They can afford to pay the money back with the help of their rate-payers,” Plunkett said.
One Republican Senate staff member said the results of Thursday’s report would definitely come into play during September’s talks.
“There is evidence that the industry has figured out a way to assess and ensure for this risk,” said the staffer, who did not want to be named. “I don’t think all the wrinkles are out yet, but here is evidence that the market has learned how to deal with this new risk.”
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