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House TRIA Bill A Mied Blessing

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The House overwhelmingly passed legislation on Dec. 7 extending the Terrorism Risk Insurance Act that is a mixed bag for the life insurance industry.

The 371-49 vote on S. 467 sets up a conference, probably next week, between the House and Senate to reconcile vastly different bills. Congress wants to adjourn for the year by Dec. 17.

The House legislation is a mixed bag because it includes coverage of group life insurance, a four-year goal of the life insurance industry. But, at the same time, it includes a provision which prohibits discrimination in life insurance policies based on a person’s plans for foreign travel.

The American Council of Life Insurers, Washington, says it would have difficulty supporting the bill with the travel insurance amendment, but a representative of the Group Life Coalition, Washington, says the group would support the bill.

The administration, however, says it didn’t like adding group life to the program because it wasn’t necessary.

Phil Anderson, executive director of the Group Life Coalition, said after the vote that, “The overwhelming, bipartisan inclusion of group life in the House version of this critical legislation will hopefully serve as reminder and wake-up call that the House of Representatives will not prioritize the financial security of buildings over people.

“Chairmen [Mike] Oxley, R-Ohio, and Richard Baker, R-La., and ranking members Barney Frank, D-Mass., and Paul Kanjorski, D-Pa., and nearly the entire House should be congratulated for getting this right; it’s about the people inside the buildings. We look forward to working with the House, Senate and White House to include group life in the final TRIA bill presented to the president,” Anderson said.

Rep. Frank, ranking minority member of the House Financial Services Committee, called the travel insurance provision “an important consumer protection provision.”

The Senate bill contains neither provision.

The provision, authored by Rep. Debbie Wasserman Schultz, D-Fla., and accepted by voice vote in the Financial Services Committee, prohibits the denial of life insurance or the charging of premiums that are not based on sound actuarial principles or on a good faith actuarial analysis solely because a person plans to engage in lawful travel outside the United States.

The provision allows insurers to price for risk, but it will prohibit them from simply denying Americans life insurance based solely upon possible travel, according to Rep. Frank.

Frank Keating, ACLI president and CEO, said immediately after the vote that the industry is “deeply disappointed” with the travel amendment language.

He added that, “The life insurance industry is prepared to support the TRIA reauthorization bill if it does not include this attack on fundamental concepts of risk assessment.”

But, the Bush administration immediately issued a statement saying it “strongly opposes” the House bill, which adds group life, and by implication supports the more bare-bones Senate language.

“Instead of scaling back the Federal backstop,” the House bill “expands the program by including group life insurance as a covered line and by adding domestic terrorism coverage…among other changes.

“The private market for these lines of coverage has remained robust and competitive, absent a Federal backstop, since TRIA’s inception,” the administration added.

“Adding new lines to the Federal reinsurance backstop sends the wrong signal to the marketplace, which should be encouraged to find new ways to diversify the risks of doing business,” according to the administration statement of position.

The House bill calls for different retention levels for industry based on lines of business.

Specifically, workers’ compensation would have a 16% level the first year of renewal and 18% in the second year; property, 20% in the first year and 22.5% in the second year; group life, 21.5% in the first year and 24% in the second year; casualty, 25% in the first year and 30% in the second year; and NBCR (nuclear, biological, chemical and radiological), 7.5% in the first year and 8.25% the second year for workers’ compensation, group life, and property and casualty.


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