I was greeted this morning with the news that Congress failed toact on TRIA before adjourning for the year, meaning TRIA willexpire at the end of the year. This was a big surprise, asmost felt the House would be the reason for TRIA not gettingextended. Last week the House passed a TRIA extension bill, but itwas the Senate that ultimately failed to take up a vote on theissue.

Why did this happen? Unfortunately, Congress has a habit oftacking unrelated riders onto bills with the hope of getting theseissues passed. In this case, the House added amendments to NARAB IIlegislation, which has to do with licensing of insurance agents andbrokers. Some in the Senate were not comfortable with those issues,which kept the Senate from approving the House bill on TRIA.

So what happens now with TRIA? The new Congress will reconveneon January 6, 2015, and the expectation is they will take up TRIA.However, given what just happened, you cannot assume the newCongress will pass a TRIA bill. And even if they do, a new bill maylook substantially different than what was on the table.

What does this mean to the workers’ compensation industry? Wehave already seen the reaction from the marketplace.

Back in February, carriers started issuing policies thatcontemplated coverage without the TRIA backstops. We saw somecarriers pull back from certain geographic locations -- mostnotably in New York City, particularly in Manhattan. We alsosaw some carriers change the terms of their policies and only bindcoverage through the end of the year, giving themselves theflexibility to renegotiate terms or terminate coverage if TRIA didnot renew.

There were legitimate concerns that the workers’ compmarketplace in New York City would be in chaos by the fourthquarter of 2014 as brokers scrambled to place coverage beyondJanuary 1, 2015. The New York State Insurance Fund was in themiddle of these discussions, as they were faced with the prospectof having to provide coverage for employers if the privatemarketplace did not respond.

As the year progressed, something else happened. The marketplaceresponded. While some carriers pulled back in certain geographiclocations, others stepped up to take their place. While somecarriers tied their policy expiration to the expiration of TRIA,other carriers did not. Ultimately, employers were still able toobtain workers’ compensation coverage in the privatemarketplace.

What does this mean going forward? There may still be somepolicies out there that have endorsements allowing the carrier tocancel or renegotiate terms if TRIA expires, but I do not get theimpression that this is a widespread issue. Since workers’compensation is statutory, and carriers cannot exclude for cause,there cannot be terrorism risk exclusions on a workers’compensation policy. The carrier’s only choice is to providecoverage or decline the risk.

While this may not hold true for other lines of coverage, theworkers’ compensation marketplace has adapted to the absence ofTRIA. Carriers are likely paying more attention to their geographicconcentration of exposures, which means employers will have fewerchoices, and may see higher pricing. But, at the end of the day,employers should be able to obtain workers’ compensation coveragewithout the TRIA backstop in place.