Progress is taking place at a snail's pace, reveals congressman Barney Frank
Hopes for an optional federal charter for the insurance industry in the US have been dashed by a senior American politician.
Barney Frank, chairman of the US House of Representatives Financial Services Committee, told delegates at the Property Casualty Insurers Association of America's annual conference in Boston that “nothing will happen on an optional federal charter with this Congress.”
The politician did concede, however, that progress was being made within government, although the life charter is currently more developed than non-life.
Frank also revealed that he was determined to “do something about a federal or state backstop" for natural catastrophes. He clearly supported the idea of a public/private partnership.
Speaking specifically about Florida, he said he was sure that “the state would become the reinsurer of choice” and that by March next year, a bill should have emerged that outlined ideas for some form of national catastrophe bonds or state-by-state cat funds.
The congressman also touched on terrorism, a subject especially close to the heart of PCI members.
“Nothing will happen on an optional federal charter with this Congress
“The argument for governmental law on terrorism risk insurance is overwhelming,” he said. “Some parts of the country are going to be more at risk from terrorist attacks than others. It will therefore cost more to do business in one city than the other. Therefore surely this is national security matter.”
Frank also outlined his concerns that group life was not covered by the current Terrorism Risk Insurance Act (TRIA).
“TRIA without group life is like a neutron bomb [a device that destroys life but leaves property undamaged]. It makes me very uneasy that we are compensating for the loss of a building but not the loss of life.”
Frank said that even if a market could be created for terrorism risk insurance, he was against it.
He pointed out that while consumers can reduce the risk of burglary by installing a house alarm for example, it was nearly impossible to reduce the risk of terrorist attacks, especially from “domestic crazies”.