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

The vote was 32-27.

The panel approved the bill after rejecting a substitute measureproposed by Democrats that would provide a straight 10-yearextension of the program.

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

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

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

Legislation creating a more streamlined insurance agentlicensing process by establishing a clearinghouse, the NationalAssociation of Registered Agents and Brokers (NARAB), was attachedThursday to the TRIA bill. It has strong industry and legislativesupport.

Equally important was what was not included. The panel committeditself to reporting out legislation that would clarify the intentof Sec. 171 of the Dodd-Frank Act, the so-called “CollinsAmendment.” But it did not attach that legislation to the TRIAbill, with members saying they would delay action on that billuntil they could find another measure to attach it to.

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

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

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

He says the bill accomplishes three things: First, itstrengthens vital taxpayer protections without altering theprogram's fundamental functions. Second, the bill brings greatercertainty and stability to the terrorism risk market. “Lastly, theTRIA Reform Act lays the foundation for a more robust privatemarket for terrorism risk,” Neugebauer says.

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

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

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

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

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

Democrats, however, had a contrary view. “I care deeply aboutTRIA, and I want to see Congress pass the strongest TRIA billpossible,” says Rep. Carolyn B. Maloney, D-N.Y., a ranking minoritymember 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 terrorisminsurance is readily available, and affordable, to all Americanbusinesses.”

Rep. Maxine Waters, D-Calif., ranking minority member of theHouse FSC and a fiery debater, adds that, in its current form, “Ibelieve that this bill will jeopardize a program that has createdjobs, spurred economic growth, and protects our nation's economyfrom the costs of a terrorist attack.”

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

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

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

NARAB II

Legislation establishing the National Association of RegisteredAgents and Brokers (NARAB) was added to a bill reauthorizing afederal backup for terrorism risk Thursday by unanimous consentduring debate on various pieces of legislation. The NARAB portionof the bill has strong legislative as well as industry support.However, during debate Thursday, Rep. Ed Royce, R-Calif., did voiceconcern that the bill gives too much power to the NationalAssociation of Insurance Commissioners, a non-governmental body, toadvise presidents in picking members of the governing body ofNARAB.

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

Jon Gentile, PIA national director of federal affairs, sayswhile the association supports creation of NARAB, “PIA believes theFIO has no such authority, and that authority for NARAB II shouldnever be granted to the FIO. We look forward to working with thefull Senate and House to pass a long-term reauthorization of TRIAas soon as possible,”

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

Charles Symington, senior vice president of external andgovernment affairs for the Independent Insurance Agents and Brokersof America, says NARAB II would achieve much-needed reciprocity inproducer licensing and help policyholders by permitting greatercompetition among agents and brokers. “This legislation would buildupon regulatory experience at the state level, promote greaterconsistency in agent and agency licensing, and ease the burden thatmany agents face in doing business across state lines,” Symingtonsays.

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

However, momentum has been re-established for NARAB becauseindustry officials have argued that, despite these efforts atreciprocity, the full promises of the original NARAB law have notbeen met, as the administrative burdens of state-by-state licensurehave grown, not diminished.

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

On a purely voluntary basis, agents and brokers can apply toNARAB for membership. Upon meeting the NARAB criteria, theycan use the agency essentially as a “passport” system formulti-state licensure. NARAB's membership criteria will beestablished by a board that is dominated by state insurancecommissioners.

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

That, however, has stirred some concern.

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