Maloney, Corzine Call for Swift Passage of Terror Reinsurance Legislation

Jun 17, 2002
Press Release

Maher Terminals, Port Elizabeth, NJ - Today, Rep. Carolyn B. Maloney (D-NY) and Sen. Jon Corzine (D-NJ) called on the Senate to pass legislation that will establish a temporary federal program to compensate for the unavailability of terror insurance.

"It is my belief that this legislation is truly the economic stimulus bill for our region," said Congresswoman Maloney. "I truly hope the Senate Democrats are able to maintain a clean bill that addresses the reinsurance problem without extraneous issues.

"Without federal intervention our economy faces a possible credit crunch and nowhere will this impact be more serious than in my district and in the New York-New Jersey region. Property and Casualty insurers, including workers compensation providers, will be unwilling to write policies and without Property and Casualty coverage banks will refuse to lend money for major capital improvements or real estate projects.

"Without a safety net for catastrophe, businesses simply won't do business. They won't employee people. The consequences are massive and old political agendas should not get in the way."

Background:

Since reinsurance contracts are generally fairly short-term and with the risk of a future terror attack remaining high, many of them have already either ceased to be extended, significantly raised the prices they charge to extend, or have excluded terror insurance from their reinsurance contracts.

While the reinsurers have the flexibility to exclude terrorism coverage from their contracts, most primary property and casualty insurers do not under state law.

As a result they either can choose to carry the potentially massive risk from another terrorist attack themselves or they can withdraw from the property and casualty market.

At the request of the Financial Service Committee GAO looked into this problem. Specifically, the GAO cited as examples:

  • A major commercial real estate company holding several "trophy" properties in U.S. cities that formerly held $1 billion in terror insurance is now only able to get $25 million coverage.
  • A New York insurance brokerage firm was able to get a client $100 million of terror insurance at twice the cost of last year's policy that covered $500 million damage.
  • An owner and operator of Midwestern City's principal airport and several smaller airports experienced a 280 percent increase in its aviation liability premium for 2002.

    • Sen. Corzine is a leader on the terror insurance issue as a member of the Senate Banking Committee and Joint Economic Committee. The event was held a Maher Terminals in Port Elizabeth, New Jersey. Basil Maher, President and COO of the terminal cited the lack of affordable terrorism insurance on seaports, airports, bridges, and tunnels. Emanuel Stern, the president of Hartz Mountain, cited a doubling of insurance costs for his development company and Roxbury Township Schools Superintendent Louis Ripatrazone stated that the lack of available insurance had forced the cancellation of a student exchange program with an Australian town.

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    Issues: 
    Financial Services, Terrorism Risk Insurance Act