Because flood insurance and pension guarantee failure aren’t enough, Congress wants to extend the Terrorism Risk Insurance Act (TRIA).
The version approved by the House Financial Services Committee contains several provisions that the Treasury Department opposes, such as the addition of group life insurance and the kinds of coverage eligible for the backstop. The bill also calls for different triggers for different types of coverage — a provision dubbed siloing — that critics say would lower the damage level at which the federal program could be invoked.
The Treasury Department has not favored extension of TRIA, but agreed last summer to accept it if it were more restrictive than the original program and designed to be temporary, leaving coverage eventually to private insurers.
Treasury Secretary John W. Snow endorsed the version approved by the Senate Banking Committee. [ed. note: The Senate version is less expansive.] The panel’s actions “recognize the temporary nature of the program and place terrorism insurance on the right path to full private market participation,” he said.
The Treasury Department and other critics say the private market is now able to resume insuring against terrorism but will not do so as long as the federal government provides the coverage at little or no cost.
I’ve left out the details because they don’t matter in the discussion of principle. They’re in the article if you want them. What’s important here is that the government is once again circumventing the private market and the Treasury Department tried to explain this. It’s nice to have the assurance that someone will pay for the damage should another attack occur, but it’s not at little or no cost.
An attack could occur anywhere, but no one expects it to be in Peoria. Those people shouldn’t pay for the risk inherent in building a new skyscraper in New York City. We should’ve learned this lesson with every hurricane that comes along. The private market would’ve compensated for the extra risk to lives and property along the Gulf Coast by making it (prohibitively?) expensive to live and work there, but our helpful friends in Congress crushed that. Taxpayers get the $200 billion bill, yet the undesirable fallacy of socialized risk
management denial marches on.
Post Script: Thankfully we have someone in Congress to put it all in perspective.
“I do not regard TRIA as a favor to the insurance industry,” said Rep. Barney Frank (D-Mass.). “It’s a favor to the insureds.”
I think that (D-Mass.) should read (S-Mass.) “favor to the insureds” shows me that Rep. Frank prefers his capitalism with a large dose of socialist stupidity.