Senators Press Treasury On TRIA Extension

By Steven Brostoff, Washington Editor

NU Online News Service, May 17, 4 :16 p.m.EDT?The Treasury Department must decide soon whether itsupports extension of the Terrorism Risk Insurance Act, severalmembers of the Senate Banking Committee said.[@@]

During a hearing on TRIA, both Republican and Democratic membersof the committee said that the uncertainty over whether TRIA willbe extended could impede economic activity and interfere with theinsurance marketplace.

Moreover, they said, Congress will have very little time tolegislate unless Treasury makes a decision quickly.

Brian Roseboro, Undersecretary for Domestic Finance withTreasury, was pressed repeatedly for a timetable during whichTreasury will make decisions on two elements of TRIA.

The first is whether to extend the current law. The current lawexpires on Dec. 31, 2004, but Treasury is authorized to extend itthrough Dec. 31, 2005 by issuing a regulation.

The second element is whether the program should be extendedbeyond Dec. 31, 2005, which would require new legislation. Treasuryis required by TRIA to provide Congress with a report on theeffectiveness of TRIA and on the ability of the private market tooffer terrorism insurance if TRIA expires.

But despite repeated urging to state a position on these twoissues, Mr. Roseboro said that Treasury is still collectinginformation and is not yet ready to make decisions.

Sen. Chris Dodd, D-Conn., said that TRIA should have been afive-year program at the outset, but the political reality of thetime was that a five-year program wasn't possible.

Still, he said, TRIA has had an important psychological impactand has injected confidence in the market.

Sen. Robert Bennett, R-Utah, noted that he and Sen. Dodd arecirculating a letter among committee members that will be sent toTreasury urging it to extend TRIA.

He noted that TRIA was enacted following a long debate. Sen.Bennett said he still believes that the failure of Congress toenact TRIA quickly prolonged the recession and contributed to thesoftness of the recovery.

The recovery, Sen. Bennett said, now has traction and it wouldbe a serious mistake if TRIA is allowed to expire.

Sen. Charles Schumer, D-N.Y., accused Treasury of having a"lackadaisical attitude" toward TRIA extension.

He said he is very concerned that Treasury does not appear tohave a "sense of alarm" over TRIA extension.

Sen. Schumer said he does not understand why Treasury cannotspeed up the timetables contained in TRIA to make a decision onextending it.

(TRIA sets a Sept. 1, 2004 deadline for a decision on whether toextend the existing law and a June 30, 2005 deadline for the reportto Congress on the effectiveness of the program.)

But Mr. Roseboro replied that from the date TRIA was signed intolaw, Treasury has stood ready to exercise its responsibilities.

Treasury, he said, understands that the timetables in the TRIAdo not match up with the realities of the insurance business andwill try to make adjustments to move things along.

But in his prepared testimony, he emphasized that Treasury mustcomplete its ongoing data surveys in order to have the full andreliable information needed to make the evaluations required by thestatute.

But one member of the committee, Sen. Wayne Allard, R-Colo.,questioned the need for the legislation and challenged theinsurance industry to disclose whether it believes TRIA should bepermanent.

He said he reluctantly supported TRIA originally because of theextraordinary nature of the Sept. 11, 2001 attacks and his beliefthat a temporary backstop was needed.

But he emphasized the word "temporary," adding that TRIA itselfleaves no ambiguity about the intent of Congress that the programshould be temporary.

At the time, Sen. Allard said, the insurance industry came toCongress asking for TRIA, saying it needed a temporary backstop toallow the private reinsurance market to develop.

Now, he said, the industry is coming back with the samearguments.

"I'm not sure why we should believe it this time around," hesaid.

If the insurance industry views TRIA as a permanent program,such as the federal flood insurance program, it should say so andthen Congress can have an honest debate, Sen. Allard said.

Once a sector of business becomes dependent on a "subsidy," hesaid, it becomes more and more difficult for the business to let goof it.

The real debate, Sen. Allard said, is whether TRIA will be apermanent program or not. The insurance industry has to be clear,he said.

Sen. Thomas Carper, D-Dela., asked Mr. Roseboro why the privatemarket has not responded.

Based on the available evidence, Mr. Roseboro said, there appearto be several dynamics. First, he said, the insurance industry hasnot developed the ability to model terrorism risk and adequatelyprice the coverage.

Also, he said, from the policyholder's perspective, there is anissue of risk perception. Some businesses, he said, still believethat terrorism insurance is too expensive and those outside majormetropolitan areas may not believe they have a significantexposure.

Moreover, Mr. Roseboro said, some may believe that help will beavailable, whether or not they have insurance.