All losses are restor'd and sorrows end.
Shakespeare, Sonnet 30
The voting machines had scarce grown cold when the lame ducks began plucking
the fruits of the election from the legislative tree. Although many of us had
feared that Congress would do nothing meaningful in the short post-election period
it was to be in the nation's capital, we were in for a pleasant surprise.
Congress decided to do some really meaningful things, one of which was to pass
the eagerly anticipated Terrorism Risk Insurance Act of 2002, a bill that had
been blocked by a group of Democrats who have little understanding about what
it is that makes this country great, something Republicans have always understood.
(One thing the Democrats showed they did understand, now that they had lost control
of most everything, was that there was no sense in trying to block passage of
bills that would pass as soon as Republicans took control in January.) Hence,
the passage of the Terrorism Risk Insurance Act of 2002.
Republicans frequently complain that Democrats are all too quick to suggest
that the country's problems can be fixed by an infusion of taxpayer dollars. Republicans
know that in most instances all that is needed to solve life's problems is for
those in need to take advantage of good old American know-how, with which all
native born Americans (and some immigrants, too) are endowed. Nonetheless, as
the Terrorism Risk Insurance Act demonstrates, flexibility is not a completely
foreign concept to the Republicans. They demonstrated that they are quite willing,
if those truly in need can make a case for it, to set aside their reluctance to
use taxpayer dollars and help out those in need. And what better candidates for
Republican compassion than the nation's insurance companies?
Insurance companies, almost as much as the firefighters and police, proved
themselves heroes of 9/11. It is estimated that they paid out more than $40 billion
to those suffering losses. Even though that is what they are paid to do, it was
nonetheless wonderful to see the American system at work as the companies wrote
out checks large and small to those affected by the disaster.
The companies were proud to be part of the restorative post 9/11 efforts, but
at the same time were concerned that paying such large losses could adversely
affect their balance sheets and, indirectly, their shareholders. Their concern
was mostly hypothetical because 9/11 did not adversely affect their bottom lines
for the long term. According to the Consumer Federation of America, insurers reported
a 66.4 percent increase in profits in the first six months of 2002 which meant
that they were restored to health in a way that other victims of 9/11 could never
hope to be. Nonetheless, they were worthy of the president's and Congress' sympathy
and that, plus a potentially enormous bailout, is exactly what they got. And they
got it not from their stockholders or policy holders but from the likes of you
and me.
The act gives every taxpayer in the United States a vehicle to ride to the
rescue of insurance companies should disaster ever strike the companies (and the
United States) again. And if anyone is wondering why the taxpayer would want to
bail out a private company, the answer was given by Michael G. Oxley, an Ohio
Republican member of Congress who in a goose-bump-raising kind of eloquence said:
"The glue that holds our economy together is insurance."
The Senate bill helps insurance companies quit being insurers although that
is not, for obvious reasons, how it is presented. What it does is provide for
large sums to be paid by taxpayers to insurance companies to insure the companies
against losses they might otherwise suffer from future large-scale terrorist attacks.
Those sums will be available for each of the next three years. Obviously, the
taxpayers don't pay all the claims. That wouldn't be fair. The insurance companies
pay the first $10 billion. (By definition it's not considered an act of terrorism
if the damages suffered are less than $5 billion.) In addition, in 2003 insurance
companies will be responsible for paying a deductible equal to 7 percent of the
premiums received the previous year. The deductible rises to 10 percent in 2004
and 15 percent in 2005. The taxpayers are then permitted to participate by paying
90 percent of all losses in excess of more than $10 billion in the first year
up to a maximum of $90 billion. In the second year our obligation is only $87.5
billion and in the third year it drops even further to $85 billion. And, of course,
if there are no terrorist attacks, then we won't have to pay anything and that
gives us yet another reason to hope that there are no more terrorist attacks.
Finally, the industry is required to repay us for our help through a surcharge
on commercial policyholders, for payments up to $10 billion in the first year,
$12.5 billion in the second year and $15 billion in the third year.
An occasional taxpayer may wonder why the taxpayer is being called upon to
bail out the insurance company. Anyone wondering that, needs to be reminded of
Mr. Oxley's turn of phrase — that insurance is the glue that hold the economy
together. We taxpayers aren't glue, we're just people, but we're honored to be
able to help out the economy by helping out insurance companies. It makes us feel
important. It makes the insurance companies feel more affluent. What a happy coincidence.
Christopher Brauchli is a Boulder lawyer and and writes a weekly column
for the Knight Ridder news service. He can be reached at brauchli1@attbi.com
Copyright 2002, The Daily Camera
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