Several House Democrats introduced legislation last week that would extend the Terrorism Risk Insurance Act by two years, to Dec. 31, 2007. The legislation includes a provision broadening the bill to include support for the group life insurance industry.
The legislation as passed in 2002 included a provision giving the Treasury Department authority to broaden the bill by giving support to the group life industry, but the department declined that option even though the industry presented evidence that reinsurance for these carriers had dried up in the wake of the Sept. 11, 2001 attack.
Insurance and real estate industry trade groups lauded introduction of the measure as a “positive sign” that Congress is interested in extending the bill, an industry priority.
But, privately, insurance industry officials were less sanguine. They had been hopeful the Democrats would wait to introduce a bipartisan bill that headlined Rep. Mike Oxley, R-Ohio, chairman of the Financial Services Committee. Also, the industry is concerned because the bill would raise the retention ratethe threshold level for government contributions to losses suffered by an insurer in a domestic terrorism attackfrom the current 15% to 20% in the second year.
“The industry wants bipartisan agreement,” said one industry lobbyist who asked not to be named but whose views reflect most of the trade groups and companies view of the proposal. “We also dont like the current paradigm [existing TRIA bill] and believe the current retention levels are too high already.”
The legislationintroduced by Rep. Mike Capuano, D-Mass., joined by Reps. Steve Israel, D-N.Y., Barney Frank, D-Mass., Paul Kanjorski, D-Pa., and Joe Crowley, D-N.Y.is titled the “Terrorism Insurance Backstop Extension Act of 2005″ and was introduced as H.R. 1153.
The lobbyist said another concern with the bill is that it is consistent with industry fears Congress will demand an increase in the retention rate to 20% or perhaps 25% as the price of enactment. “That is too costly and for most insurers too high a price to pay,” the lobbyist said.
Among other things, the bill:
Makes terrorism reinsurance coverage available to group life insurance policies; and
Requires the Treasury Department to develop recommendations on long-term solutions to the terrorism reinsurance problem.
The legislation makes terrorism reinsurance coverage available to group life insurance policies
Reproduced from National Underwriter Edition, March 10, 2005. Copyright 2005 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.