Right Side of the Rainbow

A rare instance of the pruning of the corporate welfare tree:

WASHINGTON — Key lawmakers in the U.S. House of Representatives said on Wednesday that they intend to scale back a government program backing terrorism insurance even as members of both chambers pledged to renew the program.

“From my view, we can’t continue to underwrite this indeterminate risk at these levels while the (insurance) industry enjoys significant levels of profitability,” said House Republican Rep. Richard Baker, chairman of the capital markets subcommittee.

The U.S. insurance industry is lobbying for renewal of the Terrorism Risk Insurance Act (TRIA), which was seen as critical to sustaining the construction industry and the economy generally after the Sept. 11, 2001 attacks, when insurers were reluctant to offer coverage.

The law, which provides government reimbursement in the event of catastrophic losses caused by acts of terrorism, expires at the end of this year. But the Treasury Department said recently that the law should not be renewed in its current form, because taxpayers’ exposure must be reduced.

For now, the Government backstop protects industry against aggregate losses above $5 million. In other words, the industry collects all of the premiums while you and I shoulder most of the liability.

The Bush Administration proposes raising the backstop to $500 million.