Terrorism Risk Insurance Extension Act of 2005
Floor Speech
TERRORISM RISK INSURANCE EXTENSION ACT OF 2005 -- (Senate - May 12, 2005)
Mr. SCHUMER. Mr. President, I ask unanimous consent that Mr. Reid from Nevada be added as a cosponsor of S. 467, the Terrorism Risk Insurance Extension Act of 2005, introduced by my friend, Senator Dodd of Connecticut.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. SCHUMER. Mr. President, we still live in America, and particularly in my city of New York, in the shadow of 9/11, of the terrorism that occurred. Obviously, the thousands of families who have had a loved one taken from their midst live with it every moment of their remaining lives, but the rest of us live with it, too, not only in empathy for them but also in terms of the economic consequences of terrorism.
The bottom line is very simple, and that is, because of terrorism, the insurance industry, in terms of insuring risk of large structures in America--whether it be large buildings that make us so proud of the Manhattan skyline, or large arenas such as the football stadiums that dot America, or larger facilities such as Disneyland, Disney World, and amusement parks--all have difficulty getting insurance.
Insurers are worried that if, God forbid, another terrorist act occurs it will be so devastating that it will put them out of business. So they either provide no insurance or provide it at such a high rate because of the downside risk. Small as it may be--and we hope it is--it is still possible that an act so enormous that if, God forbid, it occurs, they do not want to be involved.
So 2 years ago, the Senate, House, and the President got together at sort of the end of the day and passed
terrorism risk insurance. It has been a large success. Insurance rates have come down, terrorism insurance is available, and insurance companies know if, God forbid, the worst happens there will be a backstop, and they are willing to issue policies. In turn, that means developers, builders who want to build new large structures in America, will do so, employing thousands and thousands of people, creating profits and new businesses as well.
We now come to the fact that this legislation expires--it was passed as an experiment; those who were dubious of it said, Let's see how it works--in December. But the urgency to act is much sooner than December because policies are not written for 6 months. If right now you are a business and you want to renew your insurance against risk for 1 year or 2 years or 3 years, that policy would go beyond December.
What the insurers say to many is, ``I will raise your rate dramatically'', which will raise costs and shut down construction, or ``I will not insure you at all'', which certainly shuts down construction. It means nothing will get built. So we should move this legislation quickly.
I stress we do not need to repeat last year by delaying and delaying. Last year, we began to witness, when we delayed a great deal, a loss in economic activity in the larger cities of this country in particular, even though we were well aware that ultimately this had to be done.
There are really only two alternatives. One is going to be no terrorism insurance. The private market will not fill the gap. That will prevent tens of billions in projects from going forward this summer and this fall, not next year but right now.
The second is that the market will fill the gap but only at such extraordinary prices and only in unique situations that the same thing would happen.
Why are we sitting in the Senate and in the House twiddling our thumbs? Our economy is squishy, oil prices are up, other economies outside of Asia are down, including Japan's actually, and, therefore, we are worried about the economy, and here we are putting another log on the tracks in the way of economic recovery.
There can be no dispute that terrorism insurance works, and there can be no dispute that if we do not renew it, there will be trouble. The ratings agencies have said in no uncertain terms that come December 31, if there is no terrorism insurance, they are not going to be able to give any kind of decent rating to any insurance offer.
These guys are insurers. They look for risk. They live with risk. They wake up in the morning thinking a risk, they go to sleep at night thinking a risk. We can say, oh, well, and have an ideological debate about how much should the Government be involved, or we can say, actually, people are not as worried about terrorism. It does not matter what you think, Mr. President, or what I think, it is what these insurers think. If the rating agencies say they are not going to give a decent rate to insurers, it is over, and we will not have it.
Moody's noted in an insurance brokers report that up to 75 percent of the policies written since January 1 have adopted a conditional endorsement that voids terrorism coverage if TRIA is not renewed. As we go through the year, the number of endorsements, they said, is expected to increase.
The report specifically stated these conditional endorsements appear to be an indication that unless terrorism insurance is renewed, premium spikes or a sharp reduction in the availability of coverage may result.
The report warns--this is very important--that Moody's is unaware of any viable private market initiative that would take the place of TRIA.
There are some who say: Let it expire and let's see what the market does. That is taking a huge risk because if the market does not come in, then we have hurt construction workers, laborers, and all those who
would work in these buildings.
Alan Greenspan, the Chairman of the Federal Reserve, is a very well-respected voice around here, as he should be, in my opinion. He is a free-market guy. He does not like Government involvement. Right now, I am going toe to toe with him about Fannie Mae and Freddie Mac. He would like to curb their role because he does not like the Government involved. I think they are needed in the housing market. But on terrorism insurance, even Alan Greenspan admits it is needed. Here is what he said:
This is a very difficult issue, because remember that the private markets work exceptionally efficiently in a civilized society in which domestic violence or violence coming from abroad is not a central factor.
You cannot have a voluntary market system and the creation of markets, especially insurance markets, in a society subject to unanticipated violence. And as a consequence, there are certain types of costs, which is what we have the Defense Department protecting us from, which we essentially choose to socialize.
The less of that we have, the better off society is.
Of course, this is his view, and he wants to make sure you know he does not want us to do this everywhere.
There are, nonetheless, regrettable instances in which markets do not work, cannot work. And while I think you can get some semblance of terrorism insurance, I have not been persuaded that this market works terribly well.
It is pretty clear, we need to renew this legislation, and it is likely we will renew it. What is so incredible is we are waiting and waiting, and every day we wait causes damage to jobs and the economy.
The bottom line is that financial dislocation caused by another possible terrorist attack--God forbid--is too much for our country to risk. I urge the entire Senate to pass this legislation quickly. It is cosponsored by 25 of my colleagues, and we should move it without delay and let the markets, let the insurance world, and, most of all, let jobs and construction go forth.
I yield the floor, Mr. President, and suggest the absence of a quorum.
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