Legislation introduced in the House last week that extends the Terrorism Risk Insurance Act for 10 years specifically includes coverage for group life insurance for the first time.

Life insurance industry officials voiced strong support for the decision to include group life in the bill, the “Terrorism Risk Insurance Revision and Extension Act of 2007,” H.R. 2671.

The Bush administration, however, threw cold water on the legislation.

In testimony on June 21, a Treasury official specifically said it could not support adding group life insurance to the program.

David Nason, assistant secretary of the Treasury for financial institutions, testified before the Capital Markets Subcommittee of the House Financial Services Committee, saying, “It is important that the program remain temporary and short-term.”

“The following 3 elements are critical if TRIA is to be reauthorized for a second time: The program remains temporary and short-term, private sector retentions are increased, and there is no expansion of the program,” Nason said. “Unfortunately, H.R. 2761 does not meet these critical elements.

“Without these critical elements, we would not be supportive of extending TRIA, as, in our view, the program would be moving in the wrong direction,” Nason said.

“The program should not be expanded to introduce new lines or types of coverage willingly provided by the private market. For example, we do not see any evidence of problems in the market for group life insurance or in coverage for domestic terrorism,” he continued.

“These markets continue to function despite not having access to the TRIA program,” Nason concluded.

Expanding the TRIA program to include additional coverage for well-functioning markets–as H.R. 2761 proposes–”is inconsistent with the appropriate role of the federal government in the terrorism risk insurance market,” Nason said. “Treasury would oppose any such efforts that move the program in the wrong direction.”

In general, he said, H.R. 2761 “does not meet our objectives,” he noted.

“In Treasury’s view, from both a market and economic perspective, it would be better to have no TRIA than a bad TRIA,” he said.

“We are willing to continue to work with Congress toward finding an appropriately balanced solution and to establish the appropriate increases in private sector participation,” Nason said.

However, Nason did not say the president would veto the legislation if the House bill, which calls for a 10-year extension and adds coverage of nuclear, chemical, biological and radiological threats, makes it to his desk. The legislation also contains special provisions relating to areas that have already sustained attacks, specifically New York, not contained in previous versions.

The American Council of Life Insurers, which has led the lobbying effort for inclusion of group life, lauded the decision to include the program.

“The need for this legislation is clear,” said Frank Keating, ACLI president and CEO, calling group life a “critical employee benefit.”

“For millions of Americans, especially lower-income workers, it is the only life insurance that their families can rely on if they were to unexpectedly die,” Keating said.

“Adding group life insurance to the TRIA program will help ensure that group life insurers will have the capacity to meet their commitments in the event of a catastrophic terrorist attack,” he added.

Rep. Barney Frank, chairman of the House Financial Services Committee, and Rep. Mike Capuano, both D-Mass., are the chief sponsors of the bill.

A hearing on the bill was held on June 21 before the Capital Markets Subcommittee of the House Financial Services Committee.

A markup of the bill is likely to occur in mid-July.

Summing up the future path of the legislation, Joel Wood, senior vice president, government affairs, for the Council of Insurance Agents and Brokers, said, “Eventually, I believe that there is a significant consensus that the program is justified and necessary, and whatever final passage vote occurs in the committee and on the House floor, it will be overwhelming and bipartisan.” The CIAB represents both health and property-casualty insurance brokers.

In response to the introduction of the bill, Sen. Chris Dodd, D-Conn., chairman of the Senate Banking Committee, said he will “examine the House bill as part of this committee’s ongoing work to find a more permanent solution to ensure that TRIA’s proven economic protections are retained and extended.”

Dodd has voiced support for establishing TRIA as a permanent government plan, something which is likely to be opposed by the Bush administration.

At the hearing, Jill Dalton, a managing director at Marsh Inc., a subsidiary of the Marsh & McLennan Companies Inc., New York, and leader of Marsh’s terrorism specialty practice, said it is appropriate that group life is being included for the first time.

In her testimony, she said she consulted with officials of Mercer Human Resources Consulting, another subsidiary of Marsh & McLennan Companies Inc., and said Marsh supports the proposal to extend TRIA to cover group life insurance.

“In contrast to property and casualty insurance, there has been no appreciable reduction in the availability of group life insurance, but it often comes at a higher price because companies that offer group life coverage have had to increase risk charges and purchase increasingly expensive catastrophic reinsurance,” she said.

“We believe that including group life insurance in a TRIA extension could help reduce these costs and potentially make this important workplace benefit more widely available,” Dalton added. “Keeping costs down is especially important given that employer-provided group life insurance represents nearly half of all life insurance in force.”

Because workers are likely to be concentrated geographically, any catastrophic event could affect many lives under a group plan and generate significant exposure to loss for the insurers of those groups, she added. “Group life is often the only life insurance coverage an individual has during his or her working years, so it is critical that group life insurers be able to pay promised benefits when due. Including group life in an extension of TRIA will help achieve this goal.”

Besides adding group life, the bill makes other improvements in the current program. For example, it requires insurers to “make available” insurance coverage for nuclear, chemical, biological and radiological terrorist attacks.

But at the same time, it covers damages stemming from an NCBR attack to a greater extent than it does for a conventional attack.

It also adds acts of terrorism by U.S. citizens and requires further study of the development of a private terrorism insurance market.

The life industry first sought coverage for group life in a federal terrorism risk insurance program in late 2001, just months after the entire insurance industry began lobbying for such a backup in the wake of the terrorism attacks on New York and Washington on Sept. 11, 2001.

Legislation passed by Congress in November 2002 authorized the Bush administration to provide such coverage if the Treasury Department deemed it appropriate, but the administration consistently declined to do so.