A divided House Financial Services Committee advanced to the House floor today legislation that sets a path to phase out, after five years, the federal backup for terrorism risk insurance for attacks except for nuclear, biological, radiological, and/or chemical (NBCR) events.

The vote was 32-27.

The panel approved the bill after rejecting a substitute measure proposed by Democrats that would provide a straight 10-year extension of the program.

The House bill is largely opposed by the insurance industry, which instead generally supports the Senate's seven-year version that is more consistent with the current program.

The controversial legislation now faces an uncertain path on the House floor because it slipped through the committee only with Republican support, and there is a potential that Republicans from urban districts could join with Democrats to push through legislation that is more in line with companion legislation reported out June 3 by the Senate Banking Committee.

The objective of House FSC leadership is to get floor action on the bill before Congress adjourns for the July 4 recess. That would set the stage for negotiations with the Senate over its version of the bill in July before Congress goes out on its month-long summer break.

Legislation creating a more streamlined insurance agent licensing process by establishing a clearinghouse, the National Association of Registered Agents and Brokers (NARAB), was attached Thursday to the TRIA bill. It has strong industry and legislative support.

Equally important was what was not included. The panel committed itself to reporting out legislation that would clarify the intent of Sec. 171 of the Dodd-Frank Act, the so-called “Collins Amendment.” But it did not attach that legislation to the TRIA bill, with members saying they would delay action on that bill until they could find another measure to attach it to.

The Collins Amendment bill was shoved through the Senate under accelerated procedures June 3.

The House TRIA bill extends the program for five years, but calls for gradually increasing the program trigger for all non-nuclear, biological, radiological, and/or chemical (NBCR) events, from $100 million to $500 million by 2019, effectively phasing out TRIA for non-NBCR events.

Rep. Randy Neugebauer, R-Texas, primary author of the bill as chairman of the House FSC's Housing and Insurance Subcommittee, says he sees the bill “as an effort to recognize and keep pace with the market developments of the terrorism risk insurance marketplace over the past decade.”

He says the bill accomplishes three things: First, it strengthens vital taxpayer protections without altering the program's fundamental functions. Second, the bill brings greater certainty and stability to the terrorism risk market. “Lastly, the TRIA Reform Act lays the foundation for a more robust private market for terrorism risk,” Neugebauer says.

Rep. Jeb Hensarling, also R-Texas, chairman of the panel, was candid in saying he thought the program was still too generous to the industry and should be further curtailed, but didn't have the political support to get such legislation through the committee.

Hensarling at one point 10 days ago considered a challenge to Rep. Kevin McCarthy, R-Calif., to succeed Rep. Eric Cantor, R-Va., who stepped down as House majority leader. But he has made clear he will seek a top leadership post in the next Congress.

“I assure you if I was a committee of one, this is not the bill we would be considering today,” Hensarling said during committee debate on the bill Thursday. “For those who think it goes too far too fast—I for one think it goes not very far and too slowly.”

At a minimum, Hensarling says he would also include either premiums for the free coverage that reinsurance and large companies receive courtesy of the taxpayers. “Or in the alternative, increased reserve requirements to further lessen taxpayer exposure,” Hensarling said. “Regrettably, I do not feel there is sufficient support for one and further work is needed on the other. Not unlike some members of the [Senate], I hope that we can review this issue in the future,” Hensarling says.

He adds, “But I do believe this bill is a reasonable set of changes to improve a needed-but-yet-still-temporary program and prepares stakeholders for the future by realistically assessing the true benefits and costs of TRIA's current framework.”

Democrats, however, had a contrary view. “I care deeply about TRIA, and I want to see Congress pass the strongest TRIA bill possible,” says Rep. Carolyn B. Maloney, D-N.Y., a ranking minority member of the committee.

She adds, “I can't support a bill that would, I believe, undermine the whole point of TRIA — to make sure that terrorism insurance is readily available, and affordable, to all American businesses.”

Rep. Maxine Waters, D-Calif., ranking minority member of the House FSC and a fiery debater, adds that, in its current form, “I believe that this bill will jeopardize a program that has created jobs, spurred economic growth, and protects our nation's economy from the costs of a terrorist attack.”

She says the House bill picks winners and losers. Specifically, Waters says, “This proposal arbitrarily bifurcates types of terrorist attacks–forcing insurers to pay significantly more should an attack be of 'conventional' means, rather than one that is Nuclear, Chemical, Biological or Radiological.”

She also says the bill picks winners and losers through changes to policies that would hurt smaller insurers. “The bill allows insurers to voluntarily opt-out of TRIA's mandatory requirement in instances of financial hardship. But in actuality, this means large insurers will either be forced to fill in the gaps in coverage, increasing the concentration of risk, or capacity will be reduced and take-up rates will suffer.”

Waters says, “This bill punishes small, regional and niche insurers and contradicts one of the fundamental purposes of TRIA –to make terrorism coverage mandatory and available.”

NARAB II

Legislation establishing the National Association of Registered Agents and Brokers (NARAB) was added to a bill reauthorizing a federal backup for terrorism risk Thursday by unanimous consent during debate on various pieces of legislation. The NARAB portion of the bill has strong legislative as well as industry support. However, during debate Thursday, Rep. Ed Royce, R-Calif., did voice concern that the bill gives too much power to the National Association of Insurance Commissioners, a non-governmental body, to advise presidents in picking members of the governing body of NARAB.

And the National Association of Professional Insurance Agents voiced concern about comments by the Federal Insurance Office that it will monitor NARAB, “consistent with its authority.”

Jon Gentile, PIA national director of federal affairs, says while the association supports creation of NARAB, “PIA believes the FIO has no such authority, and that authority for NARAB II should never be granted to the FIO. We look forward to working with the full Senate and House to pass a long-term reauthorization of TRIA as soon as possible,”

Ken Crerar, president and CEO of the Council of Insurance Agents and Brokers, says, “Relief from the extraordinary burdens of nonresident interstate licensure has been long in coming, and we think we're now very close to achieving it.”

Charles Symington, senior vice president of external and government affairs for the Independent Insurance Agents and Brokers of America, says NARAB II would achieve much-needed reciprocity in producer licensing and help policyholders by permitting greater competition among agents and brokers. “This legislation would build upon regulatory experience at the state level, promote greater consistency in agent and agency licensing, and ease the burden that many agents face in doing business across state lines,” Symington says.

The effort to streamline insurance-agent licensing has been underway for more than 20 years. The Gramm-Leach-Bliley law of 1999 called it to be implemented in 2003 unless at least half the states adopted “reciprocal” licensing laws governing nonresident licensing. The creation of NARAB itself was averted when 29 states did so– as mandated under the law.

However, momentum has been re-established for NARAB because industry officials have argued that, despite these efforts at reciprocity, the full promises of the original NARAB law have not been met, as the administrative burdens of state-by-state licensure have grown, not diminished.

The legislation is modeled after the National Association of Securities Dealers (NASD) and will be a completely voluntary, self-regulating organization.

On a purely voluntary basis, agents and brokers can apply to NARAB for membership. Upon meeting the NARAB criteria, they can use the agency essentially as a “passport” system for multi-state licensure. NARAB's membership criteria will be established by a board that is dominated by state insurance commissioners.

“The big concession we've made is on governance – that a majority of the governance has to come from state insurance commissioners,” one lobbyist involved said.

That, however, has stirred some concern.

Royce argues, “As an organization, the NAIC does not have any regulatory authority, adding that under current Federal law, no “private group or association” may “regulate in the field of interstate commerce.”

Special Reports /

Divided House Committee Advances Controversial 5-Year TRIA Extension

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