The Treasury Department may have to decide again whether to include group life insurance in the federal terrorism reinsurance program.[@@]
A bill just introduced in the U.S. House of Representatives, H.R. 4634, would extend the Terrorism Risk Insurance Act for 2 years, until the end of 2007. However, it also would increase the insurance company deductible and the retention level.
Moreover, the legislation does not affirmatively include group life in TRIA. Rather, it calls for another Treasury Department determination on group life. An earlier Treasury determination came out against including group life.
Phil Anderson, a representative of the Group Life Coalition, Washington, praises the introduction of H.R. 4634 but adds that it is important to include group life.
“As Congress works to extend TRIA, it’s important for lawmakers to remember that we need to insure the people inside the buildings, too,” Anderson says.
He cites a recent study which says that a major terrorist attack could cost the group life industry more than $9 billion.
“Without the protection of TRIA, losses of this magnitude could have a severe impact on the cost and availability of group life insurance,” Anderson says.
Jack Dolan, a representative of the American Council of Life Insurers, Washington, says that the ACLI is certainly pleased that group life is mentioned in H.R. 4634.
The ACLI’s preference, he says, is for Congress to instruct Treasury to include group life in TRIA.
Still, Dolan says, H.R. 4634 will serve as a placeholder and the ACLI will work to improve it during the legislative process.
One of the primary sponsors of the legislation, Rep. Richard Baker, R-La., said at a press briefing that he and the other co-sponsors are open to discussions with all stakeholders.
Baker added that he does not think there will be more than one extension of TRIA.
He took issue with some critics who charge that TRIA’s structure inhibits development of private-sector solutions to the problem of terrorism insurance.
Baker said he certainly has not reached that conclusion, noting that the Treasury Department is engaged in a study to determine whether the capital markets can finance terrorism risk.
He added that terrorism insurance is vital for job creation. Many people, Baker said, have charged that the current economic recovery is a “jobless” recovery.
It would be “stupid” to take away a tool, TRIA, that creates new jobs, Baker said.
Rep. Pete Sessions, R-Texas, a co-sponsor of H.R. 4634, said that the supporters want to work with Treasury on a long-term solution. This legislation, he said, is the starting point for discussions.
The goal, Sessions said, is to have another answer in place by 2007 that is supportive of jobs and in the best interest of the country.
But TRIA extension, Sessions added, is urgently needed in the marketplace. He said he wants Congress to approve an extension before it adjourns for the year.
Rep. Sue Kelly, R-N.Y., says there is no reason to delay TRIA extension.
“It is better to have a program in place and not need it than to need a program and not have it,” she says.
She notes that TRIA extension has strong bipartisan support in the House.
Recently, she says, more than 180 House members sent a letter to Treasury Secretary John Snow urging the Bush administration to support extension.
That, Kelly says, is already very close to the 218 votes needed to pass the legislation.
Rep. Eric Cantor, R-Va., says it is important to assure that TRIA remain in place. The certainty provided by TRIA, he says, will help continue the economic expansion.
H.R. 4634 would extend TRIA until Dec. 31, 2007, and require insurance companies to make terrorism insurance coverage available for all the years of the program.
It would maintain the current 15% insurer deductible in 2006, but increase it to 20% in 2007.
It would also increase the current $15 billion industry retention to $17.5 billion in 2006 and $20 billion in 2007.
The legislation would have Treasury issue a report on long-term solutions for expanding the availability and affordability of terrorism insurance without a federal backstop.