Several House Democrats introduced legislation late Tuesday that would extend the Terrorism Risk Insurance Act.[@@]
The legislation would extend TRIA by two years, to Dec. 31, 2007. It 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. The department declined that option, however, even though the group life industry presented evidence that reinsurance for these carriers had dried up in the wake of the Sept. 11th, 2001 attack.
Insurance 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 were hopeful that 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 rate–the threshold level for government contributions to losses suffered by an insurer in a domestic terrorism attack–from 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 don’t like the current [TRIA bill] and believe the current retention levels are too high already.”
The industry is also concerned that the Bush administration declined to signal its views on extension when a Treasury Department official spoke on the issue at a conference last week in Washington, D.C. sponsored by the Networks’ Financial Institute, Terre Haute, Ind.
The new legislation was introduced by Congressman Mike Capuano, Mass., joined by Reps. Steve Israel, N.Y., Barney Frank, Mass., Paul Kanjorski, Pa. and Joe Crowley, N.Y. The bill 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 that 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.
Specifically, the bill also:
- Makes it easier for businesses to get affordable terrorism insurance by including provisions to ensure that insurance policies enacted during the last year of the program do not lose their terrorism coverage before the policy expires;
- Provides mandatory availability for terrorism coverage for policies written in the final two years of the program;
- Makes terrorism reinsurance coverage available to group life insurance policies; and
- Requires the Treasury Department to recommend long-term solutions to the terrorism reinsurance problem.
Leigh Ann Pusey, American Insurance Association’s senior vice president of government affairs, said “policyholders, insurers and many on Capitol Hill know that we need something after Dec. 31, 2004–the end date for the Terrorism Risk Insurance Act of 2002. This momentum toward the commonly held goal of providing for a federal terrorism risk insurance program is welcome.”
Pusey added that “ensuring a terrorism backstop is in place provides the economic stability needed so stakeholders may focus on working with the House and Senate to construct a long-term bipartisan solution.”
Martin L. DePoy, vice president for government relations for the National Association of Real Estate Investment Trusts and spokesperson for the Coalition to Insure Against Terrorism, said the coalition welcomes the introduction of the bill.
“This is another sign of the growing Congressional commitment to maintain the nation’s economic security,” DePoy said.