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WASHINGTON – A year after the terrorist attacks, the Consumer Federation of America has withdrawn its support for broad federal back up terrorism insurance legislation and now backs narrower, targeted measures. A recently released follow-up CFA study, How the Lack of Federal Back Up for Terrorism Insurance has Affected Insurers and Consumers: An Update, finds there is no terrorism insurance crisis since “terrorism insurance is widely available, rates are falling, the insurance industry is in extremely good financial shape, and banks are lending freely to businesses, regardless of whether they have terror coverage.” “Even many of the biggest terrorism targets like skyscrapers and airlines are finding insurance coverage,” said CFA Director of Insurance J. Robert Hunter. “The financial ability of the industry to insure against terrorism has increased, even when the losses of September 11 are considered, while insurance availability has had virtually no impact on lending,” he said. Insurers do appear to be price gouging in some cases however. Average price increases during the second quarter of this year were 20% for small businesses, 27% for mid-sized businesses and 34% for large businesses. This represents a decline from rate increases at the end of 2001. CFA estimates that rates will stabilize completely by the end of 2002 to mid-2003. According to Hunter, although there are problems in the market especially with high rates and price gouging-the most severe problems are unrelated to terrorism risk. “The nation is in the midst of a hard insurance market but relief is almost here. This means sharp price increases will soon end and coverage will be more available, especially if the fast-developing private terrorism insurance market is not stymied by Congress,” said Hunter. “If Congress does enact broad back-stop legislation, it should be as a loan to insurers, not a giveaway program that offers reinsurance that is largely free, as the Senate has proposed.” CFA offered the following specific recommendations for Congress: *

Help the limited number of businesses that would need it, not the many that don’t. A limited bill, targeted on big “trophy” risks in very large cities, would solve the real problems that exist and limit taxpayer exposure. CFA recommends offering federal reinsurance per individual risk (such as an office tower of company) for losses above $500 million to $1 billion. *

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