Administrations Stance On TRIA Softens

“We can debate,” the $500 million figure, he said. “This is a best judgment.” Additionally, when asked if the threshold might be excessive in dealing with smaller attacks, such as those carried out against the people of London, he responded by saying that the $500 million would be counted against aggregate annualized damages, meaning that the damages of several small attacks occurring throughout the year would be combined to determine if the TRIA program should be activated.

The secretary also was told that the administration could face considerable opposition to its recommendation that the TRIA extension legislation include “reasonable” legal reform provisions.

“I am very concerned that such a posture could once again stall legislative efforts, as it delayed consideration of the original law,” said Rep. Kanjorski. Later in the hearing, he cautioned Snow that if the administration seeks to make the TRIA legislation an engine for tort reform, “that’s dead on arrival.”

Statements by Rep. Mike Oxley, R-Ohio, chairman of the House Financial Services Committee, and Sen. Richard Shelby, R-Ala., chairman of the Senate Banking Committee, also were supportive of renewal.

Rep. Oxley’s comments were much stronger. He promised “to deliver a bill on the House floor by the end of this year.” Sen. Shelby’s statement was more constrained. “Beyond today’s hearing, I am looking forward to working with my colleagues to design a targeted, short-term program that permits a transition away from a taxpayer-supported system,” Shelby said.

“In the end, I believe the best way to deal with the challenges we face is to encourage innovation along all fronts and to draw upon the great strengths of our market-based economy,” Shelby added.

That is consistent with the approach outlined by the Treasury Department in its June 30 statement.

A report to members prepared by the Council of Insurance Agents and Brokers, Washington, after the July 13 hearing before the House Financial Services Committee says “Snow’s verbal testimony today and response to questions was extremely conciliatory and almost completely at odds with the utterances of Treasury officials in the past two weeks, at least in tone.”

The CIAB report adds, “Repeatedly, Secretary Snow said that it is his desire to work with Congress to develop an acceptable approach for a more limited federal backstop–one that has higher deductibles, industry retentions, provides greater “taxpayer protection,” and provides legal reforms.”

The Coalition to Insure Against Terrorism, Washington, which is headed by the real estate investment industry, had a similar view. Its report cites comments by Secretary Snow that “No one here is talking about ending the program.” The CIAT added, “The Secretary spoke of using the existing Terrorism Risk Insurance Act as a model and moving toward greater private sector responsibility.”

The CIAT explained that “In making clear that he supports revamping–not terminating–the backstop [what he characterized as making a good program better], Snow suggested an extension of two years.”

Insurance industry officials caution that the shape of the legislation may not be known until mid-November because of the press of other business.

“Nobody is talking about ending that backstop. What we’re talking about is revamping. The issue is can we make some improvements to the program to give the private sector more of a role to play.”== Treasury Secretary John Snow

“To have terrorism reinsurance that covers buildings, not life, would be this committee’s equivalent to the neutron bomb, which kills people but leaves buildings untouched.”–Rep. Barney Frank, D-Mass.

“In debating any plan to extend TRIA, we ought to work to incorporate group life insurance These products, after all, have characteristics similar to commercial property/casualty insurance in that there is often an excessive concentration of risk within a small geographic area.”–Rep. Paul Kanjorski, D-Pa.