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Dueling Versions Of TRIA

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House bill contains group life, Senate’s does not


Overwhelming votes for extension of the Terrorism Risk Insurance Act in both the House and Senate financial services panels last week sent a clear message that despite White House opposition, the legislation in principle will be extended beyond its current expiration date of Dec. 31.

However, because the bills are markedly different, it is likely that Congress will not send a bill to President Bush to sign before mid-December.

A key sticking point is language in the House bill adding group life insurance to the program, although group life insurers would be forced to accept a high retention level under the “silo” approach the House uses.

There is great concern among congressional staffers and lobbyists that during talks to reconcile the House and Senate bills, group life insurance will be the first tradeoff.

The leadership of the Senate Banking Committee was working to have the full Senate take up the bill after press time last Thursday afternoon.

The House, with a fuller plate of must-do legislation to digest before it departs for a two-week Thanksgiving recess, is seen as unlikely to pass its version before Saturday.

Reacting to the activity in Congress, American Council of Life Insurers President Frank Keating said, “ACLI believes the same principles that apply to insured buildings must also apply to the 160 million Americans protected by group life insurance. By including group life insurance in the Terrorism Risk Insurance Revision Act, the House Financial Services Committee took a critical step to help ensure that lives, as well as property, will be protected in the event of a major terrorist attack. We look forward to the bill’s adoption by the full House.”

It is clear, however, that the White House will push for the Senate version of the bill. In a statement after the Senate vote, Treasury Secretary John Snow said, “I’m pleased to see that actions today in the Senate to extend the Terrorism Risk Insurance Act recognize the temporary nature of the program and place terrorism insurance on the right path to full private market participation.”

In general, both bills call for a two-year extension of the two-year program and raise the current $5 million “trigger” for federal involvement to $50 million in the first year and $100 million in the second year.

But there the similarities end. The Senate mandates that the program end after the two-year extension; the House bill provides language for the bill to continue, albeit with higher threshold levels. The House bill also adds group life insurance to the listed coverages; the Senate bill does not.

The Senate Banking Committee reported out a more modest version of the current legislation by a unanimous voice vote on Nov. 16. The House Financial Services Committee approved a more expansive version later that day by a vote of 64-3.

Although there was little debate on the measure itself by the House panel, and passage by the committee was never in doubt, several members said that they would have preferred a bill more in line with White House recommendations for reducing the federal government’s exposure and increasing the burden on private insurers.

Rep. Jeb Hensarling, R-Texas, saw the Senate bill as preferable, adding that he was “very hesitant, very reluctant to see the federal government, again, permanently get into the insurance business,” through a long-term terrorism risk backstop. Hensarling also said that group life, which is included in the House version of the bill but not the Senate’s, “seems to be widely available” and that “the government’s exposure will only be greater with the silo approach.”

Despite these criticisms, the legislation is not a Democratic project, or a giveaway for the insurance industry, according to Rep. Barney Frank, D-Mass., ranking member of the committee. “This is not the bill the Democrats would have written if we were in the majority,” he said.

Rep. Frank also noted that the bill should not be seen as the government shouldering a burden that rightfully belongs to the insurance industry. “I do not regard TRIA as a favor to the insurance companies,” he said, adding it is instead “a favor to the insured.”

Many Republicans also favored the bill and called for the eventual House conferees to press for their bill’s provisions when the legislation goes to conference.

Rep. Sue Kelly, R-N.Y., “strongly” called for group life to be included when conferring with the Senate.

Perhaps the sole source of controversy in the bill was an amendment offered by Rep. Debbie Wasserman Schultz, D-Fla., that would preclude life insurers from refusing coverage based on the potential for legal travel by a policyholder, or charging “excessive” premiums without an actuarial basis for doing so. The amendment was approved by a voice vote.

Wasserman Schultz said that she herself had been denied life insurance coverage this year, “because of the possibility that I might travel to Israel,” although she said she had no plans to do so and never indicated anything along those lines on her insurance application.

Rep. Spencer Bachus, R-Ala., supported the amendment, saying that not doing so “is to give in to the terrorists.”

Additionally, Bachus noted the “irony” that insurers were seeking protection from terrorism risk with the overall bill but unwilling to extend coverage on a far smaller scale to their policyholders.

Rep. Frank Lucas, R-Okla., countered that the issue was exactly the opposite. With TRIA, he said, “we are rationalizing what we would be doing anyway,” in the event of a terrorist attack and by doing so, ensuring that premiums are lower. Life insurance, he added, “is a competitive industry,” and by forcing insurers to maintain this coverage, Congress would only be ensuring that premiums are slightly higher.

Rep. Lucas and other opponents of the amendment argued that an amendment to the TRIA bill was not the proper vehicle, and the issue should be studied more closely.

“This is the kind of thing where there should be detailed hearings on the issue,” Rep. Lucas said.

Rep. Frank, who supported the amendment, said the entire issue was being overblown and that “the fear of great numbers of Americans dying in these countries has exceeded reality.”

Jack Dolan, a spokesman for the ACLI, said after the vote: “Insurers’ ultimate goal is to sell life insurance policies to consumers. With over 1,200 life insurance companies, the marketplace is very competitive. If one company is not interested in assuming the risk of underwriting a certain individual, another company will be.”

Dolan added, “We have a general opposition to any legislation restricting our ability to underwrite properly. We are closely reviewing the legislation.”

House vs. Senate

In the House, Rep. Richard Baker, R-La., said, “The legislation I have authored maintains an affordable terrorism insurance marketplace for consumers while significantly increasing taxpayer protections and efficiencies.”

In the Senate, Sen. Richard Shelby, R-Ala., said, “I believe that this compromise [the version passed by the Senate Banking Committee] is consistent with recommendations offered by the Treasury Department and shared by consumer groups and other taxpayer interests.”


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