WASHINGTON—The insurance industry, supported by more than 400 trade groups representing all types of businesses, sent a letter late yesterday urging the House to “move swiftly” in passing legislation that would reauthorize the federal backstop for terrorism risk insurance.
“We write to you today to urge the House to move forward in reauthorizing this critical program as soon as possible,” the letter said.
The letter notes that the “tragic” terrorist attacks on 9/11 “fundamentally changed the landscape” for insuring against the risk of terrorism in the U.S.
The letter said that President Bush’s Council of Economic Advisers estimated that over 300,000 jobs were lost prior to initial enactment in 2002 of the first law, the Terrorism Risk Insurance Act (TRIA). The program was later renewed for seven years in 2007. The current reauthorization sunsets Dec. 31.
Congress reconvened Monday after a five-week summer recess.
The sense of urgency stems from the fact that Congress will be in session for perhaps only two more weeks this month before recessing in order for members to campaign for mid-term elections.
The insurance industry fears that the odds for reauthorization of TRIA in an acceptable form will drop precipitously if the House fails to act on a bill acceptable to the industry until a lame duck session after the mid-terms.
“We are telling members of the House that is critical that a bill be passed this month so that we can get a long-term bill this year,” as stated by one industry lobbyist who asked not to be quoted. The reason, he said, is that lame duck sessions of Congress are “notoriously unpredictable, and we are trying to take the unpredictability out of the equation.”
In English, the lobbyist means in this case “notoriously unpredictable” means that the consensus of electoral pundits is that Republicans will take control of the Senate through the mid-terms.
That will strengthen the hand of Rep. Jeb Hensarling, R-Texas, chairman of the House Financial Services Committee, and fellow conservatives. What they are aiming for is to enact legislation that phases out the current system over five years and replace it with one that will provide a federal backstop after that period only for nuclear, biological, radiological, and/or chemical (NBCR) events.
As stated at a July hearing, Hensarling wants the lame-duck session to pass an extension through August of the current version of the Terrorism Risk Insurance Act.
His plan is to then get a more conservative Congress to pass H.R. 4871, the TRIA Reform Act of 2014. That bill calls for gradually increasing the program trigger for all non-nuclear, biological, radiological, and/or chemical events, from $100 million to $500 million by 2019, which industry officials say effectively phases out the program for non-NBCR events.
The Senate bill is S. 2244, the Terrorism Risk Insurance Program Reauthorization Act of 2014.
The Senate raised the insurer co-pay from the current 15% to 20% and the mandatory recoupment from $27.5 billion to $37.5 billion [over five years].
In discussing the consensus Senate bill, Sen. Tim Johnson, D-S.D., chairman of the Senate Banking Committee noted that, “we were careful” in reaching this compromise that the Senate did not raise the trigger, which would drive smaller insurers out of the market and reduce affordability of coverage for business nationwide, and that “this bipartisan bill does not pick what modes of terrorism attacks would get preferential treatment over the other forms of attacks.”
The letter sent yesterday said that 9/11 left the insurance industry “unable to model frequency, location, type and the potentially devastating scale of modern terrorism.”
As a result, insurers were forced to pull out of the marketplace, and in the months following the attacks, the inability of insurance policyholders to secure terrorism risk insurance contributed to a paralysis in the economy, especially in the construction, travel and tourism, manufacturing, and real estate finance sectors, the letter said.
“The American business community needs certainty so that it can continue to focus on its primary mission of creating jobs,” the letter said. “The undersigned organizations urge Congress to reauthorize this important program without delay.”