Democrats in the House will include group life insurance in any legislation enacted to extend the Terrorism Risk Insurance Act, said Rep. Barney Frank, D-Mass., the incoming chairman of the House Financial Services Committee. His comments constitute a reversal of current policy, where Republicans, and especially the White House, have repeatedly declined to include group life in the program, which began in November 2002, and have repeatedly said that when it expires Dec. 31, 2007, it would not be renewed.
Frank made his comments on Dec. 6 at a press availability convened to discuss some of his priorities for the House Financial Services Committee next year.
“We will expand it,” Frank said in response to a question from National Underwriter. “We want to cover workers’ compensation, as well as group life insurance,” he added.
“Not covering group life insurance is like making TRIA into the latest version of the neutron bomb,” he said. “You know what the neutron bomb does? It kills people and leaves the property standing.”
Industry reaction was positive. “We’re encouraged,” said Jack Dolan, a spokesman for the American Council of Life Insurers. “There is a role for the federal government to play in helping ensure coverage is available as the reinsurance market develops to cover terrorism risks.”
Frank’s statements on TRIA expand on those he made Nov. 30 before the Consumer Federation of America, asserting that the Democrats will move early enough in the year on TRIA to provide certainty it will be extended.
He added to that by saying that under the Democrats, TRIA could be extended for as long as 5 years, and it will specifically include workers’ compensation and nuclear, chemical, biological and radiation risks.
Republicans had narrowed the bill in the last Congress, and the administration has made clear it does not want TRIA extended.
At the same time, industry officials privately cautioned that the House has consistently been more expansive about its support for TRIA than the Senate.
But Sen. Chris Dodd, D-Conn., who has generally been supportive of the industry and who played a key role in enactment of the original TRIA in 2002, will be taking over as chairman of the Senate Banking Committee next year.
At a press event on Dec. 7, Dodd said he wants to make TRIA permanent. “I will not do another extension,” he said. “It’s going to be a permanent bill or nothing.”
Dodd also said wants to move on TRIA early and doesn’t want “to wait until crunch time” in November to enact legislation.
Regarding an optional federal charter, all the senator would say is that he is “open to all arguments” and that it is “certainly a matter we’ll look into.”
In other comments, Frank said that one priority of the committee under his leadership will be passing consumer protection that better outlines what companies and consumers must do in the event of a data security breach.
He added that he will seek to create a task force of the House Judiciary, Energy and Commerce and Banking Committees to work on joint legislation dealing with the issue, ending the current gridlock created by the overlapping jurisdiction over the issue by various committees.
He made his comments after the House Democratic Caucus elected him chairman of the panel earlier in the day.
Group life has never been specifically included in the TRIA program. When Democrats were in control of the Senate in 2002, a bill enacted in November of that year gave the Treasury Department the authority to extend the program to group life, something Treasury and the White House have repeatedly declined to do.
They concluded that adequate capacity existed for insurers to provide coverage at a reasonable price. The industry, by contrast, continues to argue that the unavailability of reinsurance at a reasonable price requires them to assume dangerous risks in providing group life coverage to companies in areas at high risk of a terrorist attack.
In recent comments to NU, Cecil Bykerk, president of CDBykerk Consulting LLC, Omaha, Neb., and a consultant to the Group Life Coalition, said the specter of 9/11 continues to shadow the industry, and the reinsurance problem created by 9/11 “has not subsided.”
Reinsurance for the most part is still not available for group life industry, he said. “The group life carriers are faced with a choice of either getting out of the business or accepting full responsibility themselves.”
Some reinsurance is available, but capacity is extremely limited and the cost is very high. Even in the limited quantities it is available, “the price is quite high, relative to what it was prior to 9/11.”