In Dicta

Sunday, July 10, 2005

Terrorism insurance - let the market work

The New York Times has an article on the furious lobbying by the insurance industry to make the U.S. government continue to bear the burden of terrorism insurance.

"At issue is the Terrorism Risk Insurance Act, which was enacted in response to the terrorist attacks of Sept. 11, 2001, and is set to expire at the end of this year.

The law obligates the government to reimburse insurance companies for most of their insured losses - up to $100 billion a year - that arise from terrorism.

The issue is crucial to New York City, which bore the brunt of the Sept. 11 attacks, as well as to other major cities like Los Angeles and Chicago that offer high-visibility targets.

Insurance companies, commercial real estate developers, construction companies and virtually all of New York's political and business leadership are lobbying hard for a renewal.

But the Bush administration and Congressional Republican leaders are opposed to extending the legislation. In a report on June 30, the Treasury Department declared that private insurers were ready to shoulder the task and that the government should get out of the way."

Why have the government bear this burden when the market is more efficient? Clearly, private corporations argue that the government should bear this burden because it is in their best interests; they seek to minimize their own risk. But for society as a whole, we are better off with market-based solutions, not government "solutions."

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