With a landslide vote, the Senate Banking Committee approvedlegislation extending the Terrorism Risk Insurance Act for sevenyears, drawing a positive message from the Bush administrationbefore the committee votes were even counted.

The staffs of Sen. Chris Dodd, D-Conn., chair of the SenateBanking Committee, and Sen. Richard Shelby, R-Ala., rankingminority member, hammered out the new version last week, and onWednesday, the committee voted 20-1 to send it to the Senate floor.The only dissenter was Sen. Wayne Allard, R-Colo.

The bill makes only a few changes to the current legislation,which expires Dec. 31. These include the seven-year extension–ascompared to the current two-year extension–as well as a provisionthat adds domestic terrorism to the program.

The only other change to the current legislation adds aprovision that would mandate that the Government AccountabilityOffice conduct two studies and make recommendations to Congress.One study would examine the issue of risk posed by attacks fromnuclear, biological, chemical and radiation (NBCR) attacks, and theother study would examine capacity restraints in certain regions ofthe country, such as lower Manhattan.

These changes were designed to take the bite out of a decisionto drop two key provisions of companion legislation passed by theHouse late last month and anticipate pressure by the drafters andsupporters of the House bill to demand a conference to resolvedifferences.

One of the key provisions of the House bill absent from theSenate Banking Committee version adds NBCR coverage to the program,while the other requires issuers of terrorism risk insurance toignore prior terrorism events in a region.

In testimony before the House Financial Services Committee, theadministration had warned of a likely presidential veto if theexpansive bill proposed by the House was the final product.

The administration's new position was disclosed in a letter sentby Treasury Secretary Henry Paulson to Sen. Dodd and Sen. Shelby,R-Ala., hours before last week's Senate committee vote tookplace.

“The administration continues to believe that any TRIAreauthorization should satisfy…three key elements; however, theadministration will not oppose the version of the TRIA bill that weunderstand will be marked up in the Senate Banking Committee,”Secretary Paulson wrote.

In its earlier statements, the administration had establishedthree key elements for an acceptable extension of the TerrorismRisk Insurance Program Reauthorization Act of 2007. These were thatthe program should be temporary and short-term, that there shouldbe no expansion of the program, and that private sector retentionsshould be increased.

“Should amendments be adopted that move the current bill fartherfrom our key elements, the president's senior advisers wouldrecommend that he veto the bill,” the letter continued.

Joel Wood, senior vice president, government affairs for theCouncil of Insurance Agents and Brokers, commenting on what hecalled “a major move forward to protect the country, added that thebridge of a partisan divide achieved last week “is not onlysensible, it is reassuring in a Congress where gridlock has toooften prevailed.”

Charles Symington Jr., senior vice president for governmentaffairs and federal relations at the Independent Insurance Agents& Brokers of America, said, “With the terrorism backstop set toexpire, this significant step toward extending it on a long-termbasis comes at a critical time.”

David Sampson, president and CEO of the Property CasualtyInsurers Association of America, said, “We particularly appreciatethe exclusion of a mandatory 'make available' requirement for NBCRattacks, and also the inclusion of a seven-year term, which willallow time for a fair analysis of the potential for private sectorgrowth in this market.”

Marliss Browder, senior federal affairs director at the NationalAssociation of Mutual Insurance Companies, also sees theelimination of a mandate for insurers offering terrorism coverageto make insurance available for nonconventional weapons is apositive departure from the House bill. This “goes a long way toensuring greater participation by the nation's medium-sized andsmaller insurance companies, thus providing more competition andlower rates for consumers,” she said.

Marc Racicot, president of the American Insurance Association,highlighted the provision for expedited study of the uniqueinsurance challenges posed by NBCR threats, noting that two priorgovernment reports recognized “there is virtually no privateinsurance market capacity” for NBCR attacks.

Another distinction in the House and Senate bills–the eventtrigger level for federal involvement set at $100 million in theSenate bill and $50 million in the House bill–is one NAMIC wantsrevisited.

The lower House bill event trigger “would assure the nation themaximum participation by property-casualty insurers of all sizes,”Ms. Browder said. “We strongly urge Congress to include thisprovision in the final bill,” she said.

Patricia Borowski, senior vice president for the NationalAssociation of Professional Insurance Agents, also advocating thelower trigger said it would “ensure that America's many regionalinsurance companies–vital to the success of America's insuranceindustry–will remain in good financial standing should terroristsagain strike our homeland.”

NBCR coverage should be restored, she added, noting that a lowerdeductible for NBCR events is critical, especially for workers'compensation.

Martin DePoy, chairman of the steering committee for theCoalition to Insure Against Terrorism, praised the elimination ofany distinction between foreign and domestic terrorism in theSenate bill. “The black-and-white distinction some had believedexisted…no longer applies,” he said. “Terrorism is terrorism.”

He said CIAT will work to win support for inclusion of an NBCRprovision in a final bill. “Clearly, there is little debate thatNBCR insurance is unavailable,” he said.

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