Dodd seeks fixed fed help for insurers

Dodd seeks fixed fed help for insurers

	Published : Thu, 01 Mar 2007 01:38 By : Agencies Print this Story

WASHINGTON (AP) - Sen. Christopher Dodd, head of the Senate Banking Committee and a Democratic presidential contender, said Wednesday the insurance backstop under which the government would cover tens of billions of losses from another terror attack should be made permanent. A number of his fellow panel members disagreed.

Without a continued federal program, proponents say, the costs of building construction and other projects could rise astronomically or they could be scrubbed altogether, crimping the economy's growth.

An array of insurance industry executives appeared at a committee hearing to urge renewal of the federal program, which critics say is an unnecessary burden to taxpayers that benefits a robust, profitable industry.

Dodd's state is home to the headquarters of a number of major insurance companies and other financial services firms.

The program was enacted after the Sept. 11, 2001 attacks as many insurance companies faced record payouts. Insurers responded by limiting or dropping coverage for casualty and property losses due to acts of terrorism. The backstop expires at year's end, and insurance industry groups have been pushing for Congress to renew it -- or even make it permanent.

Proponents say it is impossible for private companies to insure against the risk of terrorism because there is no accurate way to predict the likelihood or severity of future attacks. The existence of the federal program, they maintain, helped create a strong private market for terrorism coverage that is available and affordable for American businesses.

Dodd said that merely extending the program in two- or three-year increments would sow uncertainty and confusion in the economy.

'A more permanent federal commitment is, in my view, not only something that we should do, it is something that we must do,' the Connecticut Democrat said at the start of the hearing.

While several senators of both parties agreed, others said making the program permanent would continue an undue burden on taxpayers while preventing the private market from developing normally. In the House, some key Democrats also have voiced opposition to a permanent federal backstop.

In his long-shot bid for his party's 2008 presidential nomination, Dodd can use his chairmanship of the Banking Committee -- with oversight of the financial services industries -- to flex his fundraising muscle as he attempts to show he can raise the millions needed to be a viable contender. He has accepted millions of dollars in contributions from financial and Wall Street interests during his 25 years in the Senate.

In a report last fall, a White House advisory group said insurance against losses from terrorist strikes has become more widely available and affordable since the Sept. 11 attacks though there are still problems. The report by the President's Working Group on Financial Markets, comprised of the heads of the Treasury Department, the Federal Reserve and several other federal agencies, did not make a recommendation as to whether the federal backstop program should be continued.

A Treasury Department report in June 2005, however, concluded that the program's existence has kept the insurance market from fully developing terrorism coverage on its own.

Under the backstop program, the government would cover the bulk of losses from a terror attack up to $100 billion, but the amount that the insurance industry would have to pay out has increased each year.

Among the industry executives testifying at Wednesday's hearing: Charles Clarke, vice chairman of Travelers Companies Inc., on behalf of the American Insurance Association; Don Bailey, CEO of Willis North America Inc., on behalf of the Council of Insurance Agents and Brokers; Thomas Minkler, president of the Clark-Mortenson Agency Inc., on behalf of Independent Insurance Agents and Brokers of America; Michael Peninger, president and CEO of Assurant Employee Benefits, on behalf of the American Council of Life Insurers, and James Veghte, CEO of XL Reinsurance America Inc., on behalf of the Reinsurance Association of America.