Hawaii-2014-SCR58-Introduced

WHEREAS, insurance helps protect the United States economy from the adverse effects of the risks inherent in economic growth and development, while also providing the resources necessary to rebuild physical and economic infrastructure, offer indemnification for business disruption, and provide coverage for medical and liability costs from injuries and loss of life in the event of catastrophic losses to persons or property; and

WHEREAS, the terrorist attack of September 11, 2001, produced insured losses larger than any natural or man-made event in history, with claims paid by insurers to their policyholders eventually totaling approximately $32,500,000,000, making the attack the second most costly insurance event in United States history; and

WHEREAS, the sheer enormity of the loss, combined with the possibility of future attacks, produced financial shockwaves that shook insurance markets and caused insurers and reinsurers to exclude coverage arising from acts of terrorism from virtually all commercial property and liability policies; and

WHEREAS, the lack of terrorism risk insurance contributed to a paralysis in the economy, especially in construction, tourism, business travel, and real estate finance; and

WHEREAS, the United States Congress originally passed the Terrorism Risk Insurance Act of 2002, Pub. L. 107-297 (TRIA), in which the federal government agreed to provide terrorism reinsurance to insurers; this arrangement was reauthorized pursuant to the Terrorism Risk Insurance Extension Act of 2005, Pub. L. 109-144, and the Terrorism Risk Insurance Program Reauthorization Act of 2007, Pub. L. 110-160 (TRIPRA); and

WHEREAS, under TRIPRA, the federal government provides reinsurance after industry-wide losses attributable to annual certified terrorism events exceeding $100,000,000 in claims; and

WHEREAS, coverage under TRIPRA is provided to individual insurers after the insurer has incurred losses related to terrorism equal to twenty per cent of the insurer's previous year earned premium for property-casualty lines; and

WHEREAS, after an individual insurer has reached the threshold, the insurer pays fifteen per cent of residual losses and the federal government pays the remaining eighty-five per cent; and

WHEREAS, the terrorism risk insurance program has an annual cap of $100,000,000,000 of aggregate insured losses, beyond which the federal program does not provide coverage; and

WHEREAS, TRIPRA requires the federal government to recoup one hundred per cent of the benefits provided under the program by policy holder surcharges to the extent the aggregate insured losses are less than $27,500,000,000 and enables the government to recoup expenditures beyond the mandatory recoupment amount; and

WHEREAS, without question, TRIA and its successors are the principal reason for the continued stability in the insurance and reinsurance market for terrorism insurance to the benefit of our overall economy; and

WHEREAS, the presence of a robust private-public partnership has provided stability and predictability and has allowed insurers to actively participate in the market in a meaningful way; and

WHEREAS, without a program such as TRIPRA, many of our citizens who need terrorism coverage to operate their business would be unable to get insurance or unable to afford the limited coverage that would be available; and

WHEREAS, without federally provided reinsurance, property and casualty insurers will face less availability of terrorism reinsurance and will therefore be severely restricted in their ability to provide sufficient coverage for acts of terrorism to support our economy; and

WHEREAS, unfortunately, despite the hard work and dedication of this nation's counterterrorism agencies and the bravery of the men and women in uniform who fought and continue to fight battles abroad to keep us safe at home, the threat from terrorist attacks in the United States is both real and substantial and will remain as such for the foreseeable future; and

WHEREAS, because a natural disaster that strikes a military base and its surrounding commercial and residential infrastructure would have the same impact as would a terrorist attack upon that military base and its surrounding infrastructure, reinsurance coverage against damages caused by a natural disaster would be a desirable extension of the benefits of reinsurance coverage under the terrorism risk insurance program; now, therefore,

BE IT RESOLVED by the Senate of the Twenty-seventh Legislature of the State of Hawaii, Regular Session of 2014, the House of Representatives concurring, that the Legislature urges the United States Congress and the President of the United States to reauthorize the terrorism risk insurance program; and

BE IT FURTHER RESOLVED that the United States Congress and the President of the United States is further urged to expand the reauthorized terrorism risk insurance program to include natural disaster coverage; and

BE IT FURTHER RESOLVED that certified copies of this Concurrent Resolution be transmitted to the President of the United States, the Speaker of the United States House of Representatives, the Majority Leader of the United States Senate, and the members of Hawaii's congressional delegation.

	OFFERED BY:	_____________________________

Report Title:

Terrorism and Natural Disaster Risk Insurance

THE SENATE	S.C.R. NO.	58
TWENTY-SEVENTH LEGISLATURE, 2014
STATE OF HAWAII