Chairman Hensarling’s Opening Statement at Markup of TRIA and FSOC Reform Bills
June 19, 2014 -
House Financial Services Committee Chairman Jeb Hensarling (R-TX) delivered the following opening statement at today’s full committee markup of legislation to bring much needed reforms to the Terrorism Risk Insurance Act (TRIA) and much needed transparency and accountability to the Financial Stability Oversight Council (FSOC):
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Today we meet to consider three pieces of legislation, one of which is to reauthorize the Terrorism Risk Insurance Act; two other bills to bring needed transparency and accountability to the Financial Stability Oversight Council.
First we will consider the TRIA reauthorization and reform bill, offered by Chairman Neugebauer whose hard work and diligence in this area should be much appreciated by all.
This last weekend I had the occasion to be in New York City, and somewhere between the suggestion and insistence of of the gentleman from New York, Mr. King, I went to the newly-opened 9/11 Museum. It is a most solemn experience. It is a profound experience. If you go to that museum and you do not get either goose bumps or shed a tear, I question where you come from. It is a space that somehow still manages to bring life back to those who are no longer with us. It is a great celebration of life, and I would urge all Members of this committee at some time to also take Mr. King’s suggestion and see that museum.
Undoubtedly for many in this room, 9/11 is our generation’s “day of infamy.” It has changed much; it has changed the way I think about a number of public policy issues. But, 9/11 should change the way we think about much.
But I do want to be clear about the Act of which we are now going to reauthorize -- TRIA. TRIA was born in 9/11. But regrettably there is nothing in TRIA that can prevent another 9/11. There is nothing in TRIA that will save lives. There is nothing in TRIA that will save property. The hard work, the most diligent work, the work of prevention, at least in the House of Representatives, is principally the work of the Homeland Security Committee, the Intelligence Committee, and the Armed Services Committee.
So we know that TRIA primarily speaks to one issue and that is, after an unspeakable act of terrorism, who pays the bill? Property owners, insurance companies, or taxpayers? I, for one, believe that ultimately there are far too many costs that are involuntarily socialized by the government today. I think this is unfair to hardworking-taxpayers and helps drive the unsustainable debt that, once again, we see on the monitors to my left and to my right. A debt burden that hurts all, especially the poor and the downtrodden.
I remind all that TRIA, when originally envisioned, was meant to be a transitional program. Let me quote from the statute: “The purpose of this title is to establish a temporary Federal program that provides for a transparent system of shared public and private compensation… and allow for a transitional period for the private markets to stabilize ….” Yet here we are discussing the third reauthorization. If passed, TRIA, a temporary program, would be in existence for nearly 20 years.
However, after carefully studying the issue, I have concluded that today there remains a need for a Federal backstop against heinous acts of terrorism that cannot be reasonably modeled , reasonably mitigated, and whose catastrophic size truly impacts our economy.
But I also know there remains much capacity within insurance and reinsurance industries to cover far greater portions of this risk. Last fall, we heard from Kean Driscoll, CEO of Validus Re, one of the largest global insurance and reinsurance leaders, who testified: “We can and do currently price conventional terrorism risk…There is adequate reinsurance capacity to cover the insurance industry’s current [retentions].”
So with those thoughts in mind, the result before us is the TRIA Reform Act, a bill that makes, I believe, needed reforms to a program that everyone hopes we never have to use.
Some may believe the bill goes too far too fast. I respectfully disagree. By the industry’s own admission, taxpayers are currently forced to bear incalculable amounts of risk with only a fleeting promise that they might someday get a portion of their investment back.
I assure you if I was a committee of one, this is not the bill we would be considering today. For those who think it goes too far too fast, I for one think it goes not very far and too slowly. At a minimum, I would also include either premiums for the free coverage that reinsurance and large companies receive courtesy of the taxpayers. Or in the alternative, increased reserve requirements to further lessen taxpayer exposure. Regrettably, I do not feel there is sufficient support for one and further work is needed on the other. Not unlike some Members of the other body, I hope that we can review this issue in the future.
But I do believe this bill is a reasonable set of changes to improve a needed-but-yet-still-temporary program and prepares stakeholders for the future by realistically assessing the true benefits and costs of TRIA’s current framework. And again, I give a profound thank you to the gentleman from Texas, Mr. Neugebauer, for all the work he has done to bring this bill together.
Quickly, since I am way over time, I also wish to urge the full committee to support the bills before us on the Financial Stability Oversight Council. Both sides of the aisle have shown great concern over both the process of designating non-bank SIFIs and the impact it could have on our investors, our small businesses, and our economy.
The two bills we will consider today, one will bring more transparency and an open process; the other will simply call a one-year “timeout” so that Congress has a chance to assess this work. Again, there has been great concern by Members on both sides of the aisle. I think these are reasonable bills to begin to address an incredibly important issue before our committee. I urge Members on both sides of the aisle to support all the legislation before us.