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Rims opposes two Obama budget proposals
02 February 2010
The Risk and Insurance Management Society today expressed concerns with two Obama administration US budget proposals that it feels will be detrimental to commercial insurance consumers.
The Risk and Insurance Management Society (Rims) today expressed concerns with two Obama administration US budget proposals that it feels will be detrimental to commercial insurance consumers.
The proposal to reduce or eliminate the federal underpinnings of terrorism insurance was met with disappointment. “The administration’s proposal to eliminate $250m is regrettable and disappointing, from the consumer perspective,” said Scott Clark, Rims secretary and director of the risk managers trade group’s external affairs committee.
“In 2007, congress reauthorised the Terrorism Risk Insurance Act [Tria] for a seven year period. Tria and the federal government’s commitment to act as the ultimate backstop for terrorism insurance served to stabilise the market for policy holders,” Clark said in a statement.
“This legislation was the product of much negotiation and compromise from all political parties, chambers and branches of government. To attempt to withdraw the government’s support will adversely impact the availability and affordability of terrorism insurance. We hope that congress will once again see the wisdom in not adopting this as part of its budget going forward.”
The budget also appears to adopt, in concept, the Neal Bill legislation that denies tax deduction for reinsurance premiums paid to foreign affiliates by domestic insurers.
Clark believes this would impair the insurance market for individual and commercial insurance policy holders and inhibit domestic companies with foreign affiliates from ceding reinsurance in order to provide for greater capacity and liquidity.
According to Clark, an economic study of the legislation estimates that if the proposal was enacted into law, it would cost consumers $10bn to $12bn a year. “This far exceeds the revenue estimate of $233m savings the administration is projecting over five years at a far greater cost to individual policy holders and businesses of all types and sizes,” said Clark.
Clark sees an inherent conflict in policy goals: “On the one hand, the administration is curtailing the government’s commitment to ensure a stable market for terrorism insurance. On the other, it is acting to restrict one of the primary means the industry uses to manage its terrorism risk through reinsurance,” the Rims statement read.