GAO: Terrorism Insurance Soloing Not Doable

WASHINGTON, DC-A new report issued this week by the GAO lends credence to the argument that the private market cannot support terrorism coverage without a federal backstop in place. The heated debate between some members of Congress and the real estate and insurance industries was only partially laid to rest when Congress extended the Terrorism Risk Insurance Act of 2002 late last year for another two years.

“Given the challenges faced by insurers in providing coverage for, and pricing, NBCR [nuclear, chemical, biological and radiological] risks, any purely market-driven expansion of coverage is highly unlikely in the foreseeable future,” the GAO team concluded.

The Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises and the Subcommittee on Oversight and Investigations, chaired by Rep. Richard H. Baker-LA and chaired by Rep. Sue W. Kelly-NY, respectively, are holding a joint hearing today. Testifying will be insurance and real estate industry experts like Ira Shapiro, on behalf of the Real Estate Board of New York; Jonathan W. Knipe, senior vice president, general counsel and director of Business Affairs, World Trade Center Properties LLC; and Christopher J. Nassetta, president and CEO of Bethesda, MD-based Host Hotels and Resorts, Inc. They also will discuss the GAO report, which was requested by Financial Services Committee Chairman Michael G. Oxley-OH.