FOR IMMEDIATE RELEASE

November 15, 2002

Washington, DC - Congressman Paul E. Kanjorski (PA-11), a key negotiator on legislation to provide federal terrorism reinsurance, said the final agreement should boost the economy of Pennsylvania and the nation. The bill (H.R. 3210) passed the U.S. House of Representatives on a unanimous voice vote Thursday evening and is expected to pass the Senate as early as today.

“Since last year’s terrorist attacks, insurance rates have risen significantly across the country and in Northeastern and Central Pennsylvania. One of the key factors contributing to these dramatic increases has been the lack of terrorism reinsurance,” said Congressman Kanjorski, one of just three House Members who negotiated the insurance plan personally with President Bush at the White House earlier this year.

A study by the Real Estate Roundtable found that the lack of comprehensive and affordable terrorism insurance for commercial properties has resulted in more than $15 billion in real estate deals being delayed or killed nationwide, resulting in 300,000 fewer good-paying construction jobs. In addition, a recent report by the Insurance Information Institute found that insurance rates have increased by 30 percent or more since last year’s terrorist attacks. Another report by the Joint Economic Committee found that the problems associated with terrorism insurance pose a significant threat to sustained economic growth.

“Terrorism insurance is critical to protecting jobs and promoting our economic security, both locally and nationally. Without this federal intervention in the insurance marketplace, our already sluggish economy would likely experience increased instability,” noted Congressman Kanjorski.

After last year’s attacks, many reinsurers decided to stop covering losses resulting from terrorism. Primary insurers like Guard Insurance and Penn Millers Insurance Company in Northeastern Pennsylvania buy reinsurance from large international organizations to protect themselves from catastrophic losses. Although most policyholders never know it, reinsurers generally pay most of the claims resulting from a major disaster. Lacking reinsurance, some primary insurers in the property and casualty market have become reluctant to cover acts of terrorism.

“Last year’s terrorist strikes resulted in the largest insured catastrophic losses in history, estimated to total as much as $70 billion. Even though the insurance industry committed to covering those losses, they have dramatically cut back on covering the losses from future terrorism attacks. We need to fix this problem,” noted Congressman Kanjorski, who will move up to become the second most senior Democrat on the House Financial Services Committee in the next Congress.

Congressman Kanjorski was named to the conference committee that negotiated the bill because of his seniority on the Financial Services Committee. Congressman Kanjorski is also the most senior Democrat on the subcommittee with oversight of insurance issues.

“For example, I worked to ensure that this conference report allows the Treasury Secretary to consider the effect of payback surcharges on urban, smaller commercial, and rural areas, and on different lines of insurance. These considerations are important because they will ensure that individual policyholders will be treated fairly and a small business, a farmer, or other rural policyholders will not be asked to disproportionately subsidize losses associated with national symbols like a skyscraper or a large manufacturing plant,” Congressman Kanjorski added.

Key features of the legislation include:

It establishes a program within the Department of the Treasury, under which the Federal government would share the risk of loss from future terrorist attacks with the insurance industry.

It will be triggered when the Secretary of the Treasury, in concurrence with the Secretary of State and the Attorney General, certifies that an event meets the definition of an act of terrorism. That decision is not subject to judicial review, and an event must cause losses of at least $5 million to be certified as an act of terrorism.

It provides only a short-term backstop - it terminates on December 31, 2005.

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