Chairman Hensarling Opening Statement at TRIA Hearing
Sep 19 -
Financial Services Committee Chairman Jeb Hensarling (R-TX) delivered the following opening statement at today's full committee hearing on the Terrorism Risk Insurance Act of 2002:
“This is the first full committee hearing on this subject since 2005.
“It is an important hearing for a number of reasons. Number one, this is a program that is due to expire in 15 months and there are many within our economy that rely on this program and need to know what the will of Congress is. I would also note that roughly half the members of our committee were not in Congress when this subject was debated. So I hope there will be a multitude of views presented today on the topic in this hearing.
“I will admit that the timing of the hearing -- I had originally thought I would have this hearing in December -- but the gentleman from New York, Mr. Grimm, is very persistent. There are days when he is patiently persistent and days where he has been painfully persistent. And so at his persistence we are having this hearing today. I certainly know of no more vocal or outspoken advocate for the continuance of this program than the gentleman from New York, Mr. Grimm. Obviously the other gentleman from my side of the aisle from New York, Mr. King, has also been exceedingly vocal and active, as have on the Democratic side the gentlelady from New York, Ms. Maloney, and the gentleman from Massachusetts, Mr. Capuano, who have also co-authored legislation to continue the program. Their voices are important and we will hear from them soon as part of a member panel.
“Although I was not personally here in 2002, I know that the original purpose of the TRIA bill when it came out of committee was to ‘create a temporary industry risk spreading program for foreign acts of terrorism’ and “facilitate a transition to a viable market for private terrorism risk insurance.’
“I cannot find anywhere in bill text or legislative history to suggest that anyone thought that the passage of TRIA would somehow prevent future acts of terrorism. It could not take away 9/11. So to some extent we are debating today who should bear the cost of terrorism acts. Should it be insurance companies and property owners or taxpayers? I think we all acknowledge a far more important debate is the prevention. Our committee has some part of that jurisdiction; other committees down the hall have a far greater part of it.
“At the time it was a thought that originally the TRIA act would give the insurance industry time to re-capitalize and develop new models that they could price for terrorism risks and increase industry capacity. Three years later in 2005 Congress decided to make TRIA a little less temporary and extended it for two years. In 2007, Congress was back again to stretch the boundaries of modern linguistics by extending TRIA temporarily for seven additional years and expanding it to cover any acts of terrorism, foreign or domestic. So we all must recognize that in just five years TRIA has leapt in scope and quadrupled in length, neither of which I think could be mistaken for facilitating a transition to a viable market for private terrorism risk insurance.
“I think this begs a number of questions that I hope will be addressed in our second panel. What does constitute a temporary program? And I’m not sure how many of us actually have faith in an ex-ante recovery scheme of funds, so it begs the question -- if premiums are not gathered, is this truly an insurance program? Is it temporary? I certainly don’t want to get into any trouble with the CFPB for misleading advertising. Has the 11 years allowed the insurance industry to successfully model and to provide products for terrorism coverage without taxpayer support, or has TRIA prevented it?
“In 2007, the Congressional Budget Office stated: ‘In the absence of a federal mandate, insurers have a strong incentive to offer terrorism coverage to their commercial customers because to do otherwise risks their losing business on other property and casualty lines.’ Has not the capacity and the stand-alone terrorism insurance program increased significantly since 9/11? We all agree the risks of terrorism are unique, but are they so unique as to be uniquely uninsurable?
“There have been times in our nation’s past when other phenomena in American history were deemed unique: airline crashes, oil spills, power outages, criminal riots, data losses. And yet somehow the industry found the incentive and the ability to model and assess this risk. How was this done? How long did it take? Are some positing that all acts of terrorism cannot be modeled, or is it merely those nuclear, biological and chemical that cannot be reserved against or cannot be sufficiently modeled?
“It would probably come as no surprise to anyone that if we posit that private insurance companies are incapable of modeling this risk, how can we be convinced that the federal government is any better as our National Flood Insurance Program is under water, pun intended? PBGC, $34 billion deficit, and as we look at the national debt clock, which I know is inconvenient to some, it principally turns because insurance programs -- be they social insurance programs such as Social Security and Medicare or others -- the government has not done a particularly good job. That ladies and gentlemen, represents a man-made disaster. And it will certainly color my opinion on this matter. I have an open mind. It is not an empty mind. It remains a skeptical mind.”