Legislature(2001 - 2002)

04/05/2002 03:25 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HJR 38-TERRORISM RISK PROTECTION ACT                                                                                          
CHAIR MURKOWSKI announced that the next order of business would                                                                 
be House Joint Resolution No. 38, Relating to urging the united                                                                 
states congress to pass the terrorism risk protection act.                                                                      
Number 0553                                                                                                                     
CODY  RICE, Intern  for Representative  Joe  Hayes, Alaska  State                                                               
Legislature, explained  that HJR 38  urges Congress to  pass H.R.                                                               
3210,  the Terrorism  Risk Protection  Act, which  will create  a                                                               
backstop for potential  losses in the event of  a future national                                                               
disaster,  terrorist  attack,  or  other  large  scale  financial                                                               
calamity.   The [Act]  will ensure that  the losses  sustained in                                                               
the  aforementioned events  wouldn't  be  transferred to  primary                                                               
insurers  and thus  down to  the policyholders.   In  response to                                                               
Chair Murkowski, Mr.  Rice informed the committee  that H.R. 3210                                                               
is  in  the  U.S.  Senate   Financial  Services  Committee  where                                                               
deliberations are revolving around [including] tort reform.                                                                     
Number 0716                                                                                                                     
BOB  LOHR,   Director,  Division  of  Insurance,   Department  of                                                               
Community   &   Economic   Development  (DCED),   testified   via                                                               
teleconference.  He  announced the division's support  of HJR 38.                                                               
Mr.  Lohr noted  appreciation  for the  committee's interest  and                                                               
concern in regard to the effects  of the events of September 11th                                                               
on  Alaska's  insurance  market.   Furthermore,  Mr.  Lohr  noted                                                               
appreciation for  the committee's  support in urging  Congress to                                                               
consider how it might help  stabilize the insurance market.  This                                                               
resolution, HJR 38,  is timely since President George  W. Bush is                                                               
scheduled to  address the U.S. Senate  in regard to the  need for                                                               
terrorism insurance on Monday.                                                                                                  
MR.  LOHR   informed  the  committee   that  February   27th  the                                                               
Subcommittee on Oversight and Investigations  of the Committee on                                                               
Financial Services,  held a hearing  to access how the  market is                                                               
reacting to issues  related to terrorism insurance  coverage.  At                                                               
this  hearing, the  General Accounting  Office  (GAO) prepared  a                                                               
report  describing how,  in the  absence of  federal legislation,                                                               
insurance  companies and  the market  place have  reacted to  the                                                               
events of September  11th.  This report points  out that insurers                                                               
and reinsurers are  withdrawing from the market.   Since this has                                                               
been occurring gradually, the  economic consequences are unclear.                                                               
The report summarizes the situation as follows:                                                                                 
     The  ultimate scope  of these  effects is  uncertain at                                                                    
     this   time,   but   they  could   become   potentially                                                                    
     significant in an economy  recovering from a recession.                                                                    
     Deciding   whether   Congress   should  act   to   help                                                                    
     businesses  obtain insurance  against losses  caused by                                                                    
     terrorism  is  properly  a  matter  of  public  policy.                                                                    
     Consequences  of continued  inaction,  however, may  be                                                                    
     real and are potentially large.                                                                                            
MR. LOHR pointed  out that Alan Greenspan,  the National Football                                                               
League, and the  Risk Manager for the U.S.  Olympic Committee has                                                               
expressed   support  for   the   federal  backstop   legislation.                                                               
Entities   that  have   experienced  difficulties   in  obtaining                                                               
coverage or for an affordable  price include the Mall of America,                                                               
the Golden Gate  Bridge, a large Manhattan real  estate deal, and                                                               
Alaska  domesticated insurance  carriers.    Therefore, Mr.  Lohr                                                               
said  that HJR  38 is  a good  resolution and  thus he  urges the                                                               
committee's support.   However, he noted that  he would recommend                                                               
a couple of amendments that speak to the congressional process.                                                                 
Number 0897                                                                                                                     
CHAIR  MURKOWSKI  noted  that the  committee  packet  includes  a                                                               
letter from Mr. Lohr to  Senator Stevens, which essentially urges                                                               
quick  action  on  this  matter.   The  letter  points  out  that                                                               
"reinsurance contract renewals are  now being renegotiated for an                                                               
effective date  of January 1,  2002."  The letter  also expresses                                                               
concern [with  the impact]  that the  renewal of  the reinsurance                                                               
contracts  will have  in  Alaska.   Although  this  is a  gradual                                                               
effect, Chair  Murkowski asked if  Mr. Lohr has  noticed anything                                                               
precipitous as the reinsurance contracts are renewed.                                                                           
MR. LOHR  said, "The  sky  didn't fall January 1st."   Last fall,                                                               
the insurance  industry, many  trade associations,  and consumers                                                               
and bankers  made a  concerted effort to  say why  this [federal]                                                               
legislation  was important.   However,  the  actual effects  have                                                               
been  subtle  and  thus  there  was  concern  that  the  [federal                                                               
legislation] might  languish.  Mr.  Lohr related his  belief that                                                               
with the  President's renewed  interest in  this issue,  the U.S.                                                               
Senate will  probably be more  attentive to doing  something with                                                               
[H.R. 3210].                                                                                                                    
CHAIR MURKOWSKI  surmised then  that Alaska  isn't in  as serious                                                               
shape as Mr. Lohr had anticipated.                                                                                              
MR. LOHR  answered, "I think that  the jury is still  out on that                                                               
one."    He   pointed  out  that  currently   [the  division]  is                                                               
considering  rate increase  requests  from Alaska-based  insurers                                                               
that  are  almost entirely  based  on  the dramatic  increase  in                                                               
terrorism coverage.   Therefore, he  said he didn't  believe that                                                               
the market  has yet seen the  impact of that.   "If approved, the                                                               
rate  increase request  would have  a significant  effect on  the                                                               
workers' compensation  market.  And there  is tangible indication                                                               
of what's going  on with respect to terrorism  coverage in Alaska                                                               
and its  increased cost,"  he explained.   He  noted that  how to                                                               
handle the aforementioned  as a regulatory rate  making matter is                                                               
debated.   In response  to Representative  Kott, Mr.  Lohr didn't                                                               
know the  specific time the  President will speak on  this matter                                                               
and thus he offered to find out and inform the committee.                                                                       
CHAIR  MURKOWSKI announced  that no  one  else had  signed up  to                                                               
testify  on HJR  38.    Therefore, she  turned  to the  technical                                                               
amendments Mr. Lohr had mentioned.                                                                                              
REPRESENTATIVE KOTT  inquired as  to why the  resolution included                                                               
in the committee packet doesn't have a number.                                                                                  
The committee took a brief at-ease from 3:42 p.m. to 3:43 p.m.                                                                  
CHAIR MURKOWSKI clarified  that [the numbered version  of HJR 38]                                                               
is the same as the unnumbered version in the committee packet.                                                                  
Number 1132                                                                                                                     
MR. LOHR explained  that the resolution focuses on  H.R. 3210 and                                                               
support of  H.R. 3210  could be  controversial simply  because of                                                               
the latitude  left to the  other body in  shaping the bill.   One                                                               
approach would be to amend the  title to say, "Relating to urging                                                               
the  United States  Congress to  pass  terrorism risk  protection                                                               
legislation."  Furthermore, the  two specific references to "H.R.                                                               
3210, the  Terrorism Risk Protection  Act" on page 1,  lines 4-5,                                                               
should be  deleted and replaced  with "terrorism  risk protection                                                               
legislation".   Similarly,  on page  2, line  14, the  text "H.R.                                                               
3210, the  Terrorism Risk Protection  Act" should be  replaced by                                                               
"terrorism   risk  protection   legislation".     Therefore,  the                                                               
recommendation in  HJR 38 would  be generic  and leave it  to the                                                               
[U.S. Senate] as to the particular  form of the legislation.  Mr.                                                               
Lohr mentioned  that H.R.  3210 contains  some "quirks"  that the                                                               
U.S. Senate  might or might not  agree with in the  course of the                                                               
congressional process.                                                                                                          
REPRESENTATIVE HAYES  announced that  he would accept  Mr. Lohr's                                                               
recommendations as friendly amendments.                                                                                         
Number 1241                                                                                                                     
REPRESENTATIVE HAYES  moved that  the committee adopt  Mr. Lohr's                                                               
aforementioned technical  amendments to page  1, line 4;  page 1,                                                               
lines 1 and 2;  page 2, line 14, to conform  the language to urge                                                               
passage of "terrorism risk protection legislation".                                                                             
REPRESENTATIVE  KOTT objected.   He  asked whether  there is  any                                                               
other legislation pending in Congress  that addresses the subject                                                               
matter [addressed in H.R. 3210].                                                                                                
REPRESENTATIVE  HAYES   answered  that  he  didn't   believe  so.                                                               
Representative  Hayes  related  his  belief  that  if  H.R.  3210                                                               
reaches  the  conference  committee  stage,  the  U.S.  House  of                                                               
Representatives  has latitude  that far  exceeds "our"  latitude.                                                               
Therefore,  changes  that exceed  the  structure  for the  Alaska                                                               
State Legislature could occur at that point in the process.                                                                     
REPRESENTATIVE KOTT remarked that  he prefers to provide specific                                                               
guidance to Congress.  If H.R.  3210 is the only legislation that                                                               
addresses the  issue, then  it will be  the vehicle.   Therefore,                                                               
Representative  Kott  didn't  see  any reason  to  eliminate  the                                                               
reference to "H.R. 3210" in HJR 38.                                                                                             
Number 1338                                                                                                                     
CHAIR  MURKOWSKI  suggested  that  the first  "WHEREAS"  read  as                                                               
follows:   "WHEREAS  the United  States House  of Representatives                                                             
has passed H.R. 3210, the  Terrorism Risk Protection Act; and the                                                               
United  States Senate  is considering  terrorism risk  protection                                                               
legislation;".   She asked if  the aforementioned  language, with                                                               
the other changes  recommended by Mr. Lohr, as well  as the title                                                               
change would address Representative Kott's concern.                                                                             
REPRESENTATIVE  KOTT replied  that it  would be  acceptable.   He                                                               
expressed the need  for the [U.S.] Senate to be  able to know the                                                               
vehicle for which the resolution urges support.                                                                                 
MR.  LOHR informed  the committee  of his  belief that  there has                                                               
been  a  turf  war  in  the [U.S.]  Senate  in  regard  to  which                                                               
committee has jurisdiction.  Furthermore,  he reiterated that the                                                               
U.S.  House version  of  [H.R. 3210]  attempted  to include  tort                                                               
reform.   Mr.  Lohr said  that  the approach  by Chair  Murkowski                                                               
would work.                                                                                                                     
REPRESENTATIVE HAYES,  in response to Chair  Murkowski, said that                                                               
he  would  accept  Chair Murkowski's  suggestion  for  the  first                                                               
"WHEREAS" clause.                                                                                                               
REPRESENTATIVE KOTT withdrew his objection.                                                                                     
CHAIR  MURKOWSKI clarified  the amendment.   The  first "WHEREAS"                                                               
clause would read  as follows:  "WHEREAS the  United States House                                                             
of  Representatives  has passed  H.R.  3210,  the Terrorism  Risk                                                               
Protection  Act;   and  WHEREAS  the  United   States  Senate  is                                                             
considering  terrorism   risk  protection  legislation;".     The                                                               
amendment  would also  [replace  "the  Terrorism Risk  Protection                                                               
Act" language with "terrorism  risk legislation"] and incorporate                                                               
the recommendations by  Mr. Lohr to change the title  and page 2,                                                               
line 14.  There being no objection, the amendment was adopted.                                                                  
Number 1517                                                                                                                     
REPRESENTATIVE MEYER moved  to report HJR 38,  as amended,HJH out                                                               
of   committee   with    individual   recommendations   and   the                                                               
accompanying zero fiscal note.                                                                                                  
REPRESENTATIVE HAYES announced a  conflict of interest because he                                                               
works in the insurance industry.                                                                                                
CHAIR MURKOWSKI  asked if there  was any objection to  moving HJR
38 as  amended from committee.   There being no  objection, CSHJR
38(L&C) was reported  from the House Labor  and Commerce Standing                                                               

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