Extending Terrorism Bill Could Cost $8.4 Billion Over Next 10 Years

According to an estimated released by the Congressional Budget Office (CBO) on Thursday, extending the federal terrorism insurance backstop could cost the government nearly $8.4 billion from 2008 through 2017.

Published on September 7, 2007

The CBO estimate came on the eve of a House Rules Committee meeting to set terms of debate for considering the Terrorism Risk Insurance Revision and Extension, which would expand the existing terrorism insurance backstop to include group life insurance and extend the program through 2022, next week. The current program is scheduled to expire Dec. 31.

“There is no reliable way to predict how much insured damage terrorists might cause in any specific year,” the CBO report said. “Rather, CBO’s estimate of the cost of financial assistance provided under H.R. 2761 represents an expected value of payments from the program—a weighted average that reflects industry experts’ opinions of various outcomes ranging from zero damages up to very large damages resulting from possible future terrorist attacks. The expected value can be thought of as the amount of an insurance premium that would be necessary to just offset the government’s losses from providing this insurance, although firms do not pay any premium for the federal assistance offered” by the program.

During Friday’s Rules Committee meeting, Florida Republican Reps. Ginny Brown-Waite and Vern Buchanan are expected to offer an amendment to extend the backstop to respond to insured losses resulting from natural disasters for states that have established a reinsurance fund. Coverage could include earthquakes, hurricanes, tornadoes, volcanic eruptions and all other natural catastrophic exposures except floods.