Democrats on the House Financial Services Committee today continued to call for the inclusion of group life insurance in any extension of the Terrorism Risk Insurance Act 2002, despite a recommendation from Treasury Secretary John Snow that group life once again be left out.[@@]
Snow wrote in June in a letter introducing the Treasury Department’s report on TRIA that Congress should avoid adding any lines of coverage to the federal terrorism reinsurance program.
Rep. Barney Frank, D-Mass., the most senior Democratic member of the committee, and Rep. Paul Kanjorski, D-Pa., the most senior Democratic member of the committee’s capital markets subcommittee, said any TRIA extension bill ought to include protection for group life insurers.
“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,” Frank said.
Kanjorski noted that sellers of group life products, like sellers of commercial property-casualty insurance products, often expose themselves to high concentrations of risk within a small geographic area.
Rep. David Scott, D-Ga., who represents a district in Atlanta, asked Snow whether the recent bombings in London, which killed dozens of people but did relatively little property damage, had any effect on his views about including group life in the terrorism reinsurance program.
Snow said the original TRIA legislation required the Treasury Department to determine whether group life should be a part of the reinsurance program based on the availability of coverage in the primary market and the reinsurance market. Although group life reinsurance is scarce, primary group life coverage is fairly widely available, and the department determined that including group life in the reinsurance program is not necessary, Snow said.
Today, as Congress looks to extend the TRIA program, “we’re in that same position,” Snow said.
The $500 Million Threshold
Snow wrote in the letter introducing the Treasury TRIA report that the Bush administration will accept a TRIA extension bill only if the bill includes a dramatic increase in the threshold for government intervention, to $500 million, from the current level of $5 million.
At the hearing, Snow said the intervention threshold is open to negotiation.
“We can debate,” the $500 million figure,” Snow said. “This is a best judgment.”
Snow also suggested that an insurer could add up claims costs for all terrorist attacks occurring during a given year when determining whether it had reached the $500 million intervention threshold.
Snow recommended in his introduction to the TRIA report that any TRIA extension bill include provisions imposing “reasonable” limits on terrorism-related lawsuits.
The first TRIA bill came with provisions that would have limited some types of lawsuits. Kanjorski said congressional opposition to those provisions delayed enactment of the bill.
This time around, if the administration once again tries to make the TRIA legislation an engine for tort reform, “that’s dead on arrival,” Kanjorski said.