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Dear Representatives Oxley and LaFalce:
The ideologically diverse organizations listed below commend you both for offering terrorism reinsurance legislation that is far more beneficial for taxpayers and consumers than the plan proposed by the Administration. H.R. 3210, the Terrorism Risk Protection Act, would require insurers to pay back government funds that are used to cover terrorism losses. Giving away insurance to the industry, which is at the heart of the Administration proposal, is financially irresponsible. However, it is essential that H.R. 3210 be improved by requiring individual insurance companies and the insurance industry to pay for initial insured losses for terrorism before taxpayer funds are loaned to companies for terrorism claims.
As currently drafted, the legislation provides for taxpayer funds to be advanced to pay 90 percent of all claims, including first dollar losses, once the insurance industry has just $1 billion in losses.
If insurers don’t have to cover some initial losses in their entirety, they will be less likely to insist that their clients take necessary measures to increase security and to improve escape contingency plans. This would put lives and property in danger and expose taxpayers and policyholders to unnecessary losses.
A failure to include a "deductible" before taxpayer assistance is provided would also make it more difficult for private reinsurance markets to again step in to insure against such risks.
Warren Buffett, the Administration and the Senate Banking Committee have all agreed in principle that the industry could pay $10 billion in claims before government reinsurance payments are disbursed. We agree.
Legislation should not be designed to meet the demands of a certain segment of the insurance industry rather than the needs of the American people as a whole. While some of our organizations have other concerns with the legislation that we will be raising independently with you, we all agree that the legislation should include a substantial deductible in this legislation before it comes to the House floor.
J. Robert Hunter, Director of Insurance, Consumer Federation of America
David L. Keating, Senior Counselor, National Taxpayers Union
Frank Torres, Legislative Counsel, Consumers Union
Fred L. Smith, Jr., President, Competitive Enterprise Institute
Paul Beckner, President and CEO, Citizens for a Sound Economy
Robert Fike, Federal Affairs Manager, Americans for Tax Reform
Thomas Schatz, President, Council for Citizens Against Government Waste