Despite Bush administration hostility toward the idea of adding group life to the Terrorism Risk Insurance Act, a Republican-led House panel may consider a TRIA extension draft that will include protection for group life insurers. [@@]
Staff members at the House Financial Services Committee talked about the possibility of including a group life provision while sharing a summary of the new TRIA extension draft with insurance groups.
The new TRIA draft would take a so-called “silo approach” to running the federal terrorism reinsurance program.
Under the silo approach, TRIA reinsurance program deductibles would vary depending on the line of insurance. The covered lines would include workers’ compensation, property, casualty, and “NCBR” coverage, which would protect against nuclear, chemical biological and radiological risks.
The new extension draft also would establish sliding scales for the co-payments insurers would have to make and for the size of an event necessary to trigger government involvement.
Under the proposal, co-payments for insurers would range from 20% for an event causing $10 billion or less in insured damage to 5% for mega-disasters causing more than $40 billion.
The trigger for the first year of the extension would be $50 million in insured losses, up from the current $5 million, and increase to $100 million in the second year. For any year beyond that, the trigger would increase by $100 million.
The administration had proposed increasing the threshold for intervention to $500 million, which raised concerns within the insurance industry that smaller companies might not be able to participate in the program.
The proposal calls for insurers to repay the government through an assessment of no more than 3% of covered line premiums annually and has a “reset” mechanism to reduce the deductibles and trigger levels after a major event has occurred.
The proposal also would eliminate any distinction between foreign and domestic-based acts of terrorism and calls on the Treasury to craft rules encouraging the use voluntary risk-sharing mechanisms, including mutual reinsurance pools.
The original TRIA program left out group life, but the Financial Services Committee extension draft probably will include group life, committee staffers said.
Emil Henry Jr., the Bush administration’s new assistant secretary to the Treasury for financial institutions, recently told National Underwriter that the administration believes a silo approach is too complex.
Henry also repeated the administration’s argument that group life needs no terrorism protection because the group life market continues to be highly competitive even though group life carriers have been shut out of the TRIA program.