Of TRIA Creates Uncertainty

Before last Thursday, it had been expected that the House would vote early this week on a TRIA extension bill reported out of the House Financial Services Committee just before Thanksgiving by a 64-3 vote.

Time is running out on TRIA, with the current law–providing a terrorism reinsurance backstop–expiring Dec. 31. Vast differences between House and Senate extension bills must be worked out, and objections cited by President Bush overcome, before an extension can be implemented. The only certainty is if TRIA is extended, it is likely to at least have much higher triggers and retentions.

The House bill will need to be approved by a wide margin if Committee Chairman Mike Oxley, R-Ohio, is to have a strong hand in what is expected to be tense negotiations over reconciling his measure with a more bare-bones version of TRIA extension passed by the Senate by unanimous consent on Nov. 17.

Indeed, talking points distributed by Treasury officials at a Nov. 30 “retreat” for the House Republican leadership argued that the “current House TRIA extension bill contains fundamental flaws.”

For example, the paper says the House bill, by removing company deductibles and creating separate silo deductibles for different lines of coverage, “adds significant lines and exposure” and “presents gaming opportunities for multiline providers,” citing AIG and The Hartford.

“Essentially,” the White House paper said, “the House proposal expands the program by creating several ‘mini-TRIAs’–a Workers’ Compensation TRIA, a Property TRIA, a Casualty TRIA, a new Group Life TRIA, and a new NBCR [nuclear, biological, chemical, radioactive] TRIA.”

The bill also adds “significant complexity” to the program, the paper says.

Christopher B. Kende, with Cozen, O’Connor in New York–an insurance lawyer for 25 years and an advisor to numerous clients on terrorism coverage and political risk insurance–said after examining the two bills last week that “the Senate bill is designed to put off what is going to be done over the long term. It is not a solution. It is just an extension with higher limits with some idea that within two years they will know what to do.”

The House bill, he added, “seems to be a much more comprehensive effort to create a new scheme. It is much more of an effort to deal with the situation now and not delay a solution for two years.”

Insurance industry officials declined repeatedly last week to comment for the record on what one lobbyist privately called the “White House assault” on the House bill.

“It appears that earlier assurances by Treasury that they would not interfere with the House process have been abrogated,” the lobbyist said. “Chairman Oxley has iron-clad assurances that his legislation will be considered on the House floor next week, and there is every evidence that the floor vote will be consistent with the committee vote–strong and bipartisan.”

The White House accelerated its attacks on the House version of the Terrorism Risk Insurance Act and, in talking points distributed by Treasury officials at a Nov. 30 “retreat” for the House Republican leadership, argued that the “current House TRIA extension bill contains fundamental flaws.”