Huge Insurance Industry Surplus Eliminates Need for Renewal of Taxpayer-Backed Terrorism Insurance Program Originally Created As Temporary Response to 9/11 · Consumer Federation of America

Washington, D.C. – As Congress considers the future of the nation’s terrorism insurance program – the Terrorism Risk Insurance Act (TRIA), which expires on December 31, 2020 – the Consumer Federation of America (CFA) urged Members of the House Financial Services Committee, in a letter[1] sent Monday, to review the extraordinary growth and levels of the property/casualty insurance industry’s surplus capital as they contemplate the next steps for TRIA. The industry has the capacity to insure properties against terrorism losses without continuing the massive taxpayer subsidies it has been provided under the program that was originally enacted as a temporary response to 9/11, CFA wrote.

On Wednesday, the House Financial Services Subcommittee on Housing, Community Development, and Insurance and the Subcommittee on National Security, International Development, and Monetary Policy will hold a hearing on the question of reauthorizing TRIA.

“We believe the program is no longer needed, and this public subsidy of the overcapitalized insurance industry should be wound down,” said J. Robert Hunter, CFA’s Director of Insurance and former Texas Insurance Commissioner and Federal Insurance Commissioner. “If Congress wants to extend TRIA, it should no longer be as a corporate welfare program, instead, it should require insurance companies to pay a fair, actuarially sound premium for any federal backup of private coverages that Congress authorizes.”

By the end of 2018, the surplus of the property/casualty insurance industry (the amount of money backing up the business the insurers write) was $742 billion, according to data released by the Insurance Services Office and American Property Casualty Insurance Association. That surplus rose to $780 billion by the end of the first quarter of 2019, according to industry reports. Prior to the 9/11 attacks, the industry’s surplus was $326 billion, or only 44 percent of the 2018 surplus. TRIA was not, of course, in effect at the time of 9/11 and the industry survived that large claim in 2001 without much difficulty.

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