Lawmakers are talking again about the possibility of expanding the Terrorism Risk Insurance Act reinsurance program to cover group life insurance.

Failing to include group life in the TRIA program is “equal to a neutron bomb,” Rep. Sue Kelly, R-N.Y., said here today at a hearing on terrorism and insurance that was organized by 2 subcommittees of the House Financial Services Committee.

Kelly, chair of the committee’s Subcommittee on Oversight and Investigations, was alluding to a weapon that supposedly left buildings intact while killing the people inside the buildings.

Ed Harper, a senior vice president at Assurant Inc., New York, testified on behalf of the American Council of Life Insurers, Washington, that he was troubled by the lack of attention given at the hearing to insurance against loss of life.

“While much of today’s discussion has focused on the need for adequate terrorism insurance within the property and casualty insurance industry, it is also important to discuss how this issue affects the life insurance industry and its policyholders, particularly with regard to group life insurance,” Harper said. “We respect the need for adequate insurance for buildings, but does it make sense to insure buildings and not the people whose lives might be lost if those buildings go down as a result of a terrorist attack?”

The House included group life in its version of the TRIA extension bill in 2005, but the White House and Senate leaders kept group life out of the version that President Bush signed into law.

The extended program is set to expire after Dec. 31, 2007.

Group life insurers, which had about $7.6 trillion in U.S. coverage in force at the end of 2004, are especially vulnerable to terrorist attacks because many insureds are concentrated in specific neighborhoods, or even in certain large office buildings, Harper said.

Group life insurers have had trouble getting catastrophic reinsurance for their terrorism risk, Harper added.

“To the extent that such reinsurance is available, it is limited in coverage and very expensive,” he said.

TRIA does continue to include workers’ compensation insurance, which is similar in some ways to group life, and workers’ compensation insurers enjoy far greater access to reinsurance, Harper said.

“We are confident that catastrophic reinsurance would become more available and affordable for group life if it were added as a covered line in any TRIA extension,” he said. “This added reinsurance capacity would significantly reduce the risk of insolvency that many group insurers would surely face if a large scale terrorist attack were to occur.”