Washington–Legislation extending the Terrorism Risk InsuranceAct being crafted by the Republican majority staff of the HouseFinancial Services Committee will likely call for ending thefederal backstop for commercial auto and general liabilitycoverage, it was learned.

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Sources said ending coverage for commercial auto and generalliability coverage would be a bow to the Bush administration, whoserecent guidelines for extending TRIA coverage suggested such anomission.

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But it likely will call for coverage of group life insurance,according to several lobbyists briefed on the committee'splans.

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In testimony at a July 27 hearing on TRIA issues before theHouse Financial Services Committee, Ernst Csiszar, president andCEO of the Property Casualty Insurance Association of America(PCI), criticized the Treasury Department for comments in itsreport on TRIA about the lack of need to cover general liabilityand commercial automobile insurance in any TRIA program goingforward.

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"We respectfully suggest that such a move would be harmful tocommercial insurance consumers, as well as the general public, fora variety of reasons," Mr. Csiszar said.

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"Along with property and workers' compensation, generalliability and commercial automobile coverages are often written aspart of a discounted 'package' or 'program' for a variety of large,midsized and small businesses," Mr. Csiszar said. "Eliminatinggeneral liability and commercial auto from the program will make itharder for the most vulnerable employers to obtain affordablecoverage tailored to their needs."

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As an example, Mr. Csiszar said, many of the nation's hospitalswill be on the front line in the aftermath of the next terroristevent. "Our medical and pharmaceutical research facilities serve akey role as well, particularly in the case of a biological orchemical event," he said. "These facilities need a broader array ofaffordable commercial coverages to remain open and viable."

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A decision to include group life would reflect the impressivejob the Group Life Coalition has done in pleading the lifeindustry's cases to members of the committee, several lobbyistssaid.

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The proposals for extending TRIA coming out of the HouseFinancial Services Committee are being dubbed "TRIA lite" becausethey will likely call for a far more modest federal backstop thancurrently available through TRIA, which expires Dec. 31.

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Joel Wood, senior vice president and director of governmentrelations for the Council of Insurance Agents and Brokers, wasamong three lobbyists contacted by National Underwriter who saidthat it is their "understanding" that group life is likely to beincluded in the draft plan the committee staff could unveil asearly as this week.

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The legislation being drafted calls for reducing the federalbackstop for terrorism risk through two alternatives. One is ascaled-back extension of TRIA that would end in two years. Thesecond proposal being drafted would create a pooling mechanismthrough which the government would gradually end its support as thefunds contributed by private industry to various pools grow.

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The alternatives are being drafted because the Bushadministration and Rep. Tom DeLay, R-Texas, have made clear theywon't support a permanent federal backstop for terrorism riskinsurance.

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But Democrats are unlikely to support the proposal. Democrats inthe House want TRIA simply extended for two years while abipartisan plan calling for an ongoing federal backstop, albeitreduced, is devised.

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"The Group Life Coalition has done an outstanding political jobof conveying to members of Congress that if the government decidesto provide a backstop for buildings, it should provide a backstopto people as well," Mr. Wood said. The other lobbyists, who askedthat their names not be used, agreed.

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However, in confirming the plan, another lobbyist–who works fora commercial property-casualty insurance company and who asked notto be named out of concern his remarks would anger the White Houseand congressional staff–said, "It is an absurdity that group lifewould be included, but that they would scale back the scope ofcommercial coverage."

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The lobbyist added that "there is no affordability oravailability issue with group life–but there is with generalliability."

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Of equal concern, he said, is that what he called the "politicaldecision" to add group life and delete some p-c coverages, such ascommercial auto and general liability, means the basic principlebehind the initial TRIA law has "become a victim of politicalexpediency."

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"The whole idea was providing seamless coverage on allpolicies," he explained. "Now, these policies will have to bebroken apart."

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