Republican staffers on the House Financial Services Committee are drafting legislation that would take an entirely new approach to extending the Terrorism Risk Insurance Act, creating a “silo” system that would base a federal backstop on the insurability of the risk.
The new concept is totally different than extension guidelines suggested by the Bush administration and draft legislation prepared by the committee some months ago.
One of the business lines included in the proposal or “scenarios” being discussed by industry lobbyists and committee staff is group life, an industry official confirmed.
Levels of retention differ under the plan being developed. For example, losses from terrorist attacks through nuclear, chemical, biological and radiation devices would be mostly covered by the government because it is an uninsurable risk. Other coverages, such as workers’ compensation, would get some level of federal reinsurance, while some lines might receive no government coverage.
No decision has been made as to the level of retention group life insurers would have to accept, the source said.
Moreover, the Treasury Department would be left some discretion as to retention levels, another source said.
Timing remains an issue. Lobbyists for most property-casualty trade associations and companies were briefed on the new approach by committee staffers early last week and were told that action on a TRIA extension is unlikely in the House before the week of Nov. 14. TRIA is due to expire on Dec. 31.
At a flood insurance hearing in the Senate Banking Committee last week, it was made clear by Republican senators that action on an extension is a priority in that body, but timing and substance was not discussed.
Dennis Kelly, a staff official at the American Insurance Association, confirmed that Republican staffers on the committee are considering this new alternative. “The silo approach is one of the ideas we have been discussing with the Hill,” he said. “It is one idea for making the program better. What is vitally important is that Congress enacts legislation that is workable for policyholders and insurers before the current program expires.”
Kelly said the silo approach “is appealing because it is a way to have the retention levels better reflect the risk.”