With Terror Insurance Expiring, A Debate Over Its Worth

Tuesday, 27 Feb 2007 | 2:33 PM ET

In 2002, the U.S. government enacted the Terrorism Risk Insurance Act, creating a federal backup for insurers in the wake of the Sept. 11, 2001 attacks. The act expires at year's end. Is it still a valuable instrument -- or has it degenerated into "corporate welfare"?

Joseph Annotti says terror insurance is an efficient tool "that works" -- and is a necessity.

The senior vice president at Property Casualty Insurers Association of America told "Power Lunch" that the act "created a viable private market" for terror insurance -- and he declared that human acts of destruction constitute an "uninsurable risk, without the federal government." He claimed that in the wake of "9-11," but before terror insurance was enacted, the market "went south" and "buildings couldn't be built."

In addition, Annotti said that the act "costs the taxpayer almost nothing."

Terrorism Insurance
Discussing whether the risk of terrorism is worth covering with insurance, with Travis Plunkett, Consumer Federation of America Legislative Director; Joseph Annotti, Property Casualty Insurers Association of America sr. VP of public affairs and CNBC's Sue Herera

But Travis Plunkett takes issue with that "almost nothing" calculation, among other things.

Plunkett, the legislative director at the Consumer Federation of America, maintains that the insured actually "pay far more than they did" immediately after terror insurance was enacted. He says that the Treasury Department agrees with the CFA's contention that the private terror insurance market would not, in fact, disappear without federal backup -- and he says that there are more private providers of such insurance, charging lower rates, than ever.

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  • Sue Herera is a founding member of CNBC, helping to launch the network in 1989. She is co-anchor of "Power Lunch."

  • Tyler Mathisen co-anchors CNBC's "Power Lunch." Mathisen also co-anchors "Nightly Business Report produced by CNBC."

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Kenny Polcari