By arthur d. postal
The fate of the Terrorism Risk Insurance Act is still very much up in the air, based on the skeptical attitudes of key leaders in both houses of Congress.
Sen. Richard Shelby, R-Ala., who chairs the Senate Banking Committee, said Congress should very carefully consider the need to extend TRIA–due to expire on Dec. 31–and what form that extension should take, if any.
The comments of Sen. Shelby were interpreted by one industry lobbyist as supporting the position of Rep. Tom DeLay, R-Texas, the House majority leader. Rep. DeLay has argued that Congress should look at a long-term solution involving a federal backstop specifically for nuclear, biological, chemical and radiation risks, but rejects extending the current program for two more years to cover other terrorist acts.
In recent comments before the Market News International conference in New York, Sen. Shelby said Congress won’t act on TRIA until after the Treasury Department sends its mandated report on how the act is working, which is due June 30. The senator voted against TRIA when Congress inaugurated the program in the fall of 2002.
“If it is determined that the insurance markets are now over the shocks of Sept. 11, I believe that Congress should let the federal backstop expire,” he said.
“If it is apparent that our markets are improving but still lack the capacity to provide coverage, Congress will need to determine the appropriate structure for the program moving forward,” he added. “If this is the case, our priority must be to develop a program that protects taxpayers and the economy while helping to restore the efficient function of our private markets.”
At the same time, Sen. Shelby appeared to embrace some form of federal regulation for insurance, a position he has rejected in the past.
Joel Wood, vice president for government affairs at the Council for Insurance Agents and Brokers in Washington, said he did not regard the senator’s comments as implying Congress won’t extend TRIA–which remains a top industry legislative priority.
“Chairman Shelby asks exactly the right questions: Has the industry recovered since 9/11, and does it have the global capacity to get its arms around the risks associated with terrorism?” Mr. Wood said. “While all of us would rather see a resolution of this issue sooner rather than later, he is taking exactly the right approach and asking the right questions.”
Likewise, Mr. Wood said, “even though House Majority Leader DeLay has disagreed with the industry on extension of the existing TRIA program, he has done us all a great service by calling for Congress to consider a comprehensive, permanent solution.”
He said that the industry argues “that there is a pressing and probably permanent need for federal intervention.”
However, Mr. Wood added, Rep. DeLay is arguing that there “are different ways to achieve the goal of available and affordable coverage for terrorism, and it’s worth putting the options on the table.
“I wouldn’t be surprised if we didn’t all look back a year from now with gratitude for the tough scrutiny that Rep. DeLay is giving to this dilemma,” Mr. Wood concluded.
Regarding the controversial issue of whether some form of federal regulation for insurance should be considered, Sen. Shelby said he believes Congress “must closely consider” the present regulatory regime for insurance “to determine whether it is adequate to address current intricacies of our dynamic and complex markets.”
This must be done in the context of the current state-based regulatory structure that “hampers the global competitiveness of our insurance industry,” he said.
“As recent headlines have highlighted,” he added, “the insurance industry has been subject to allegations of abuse and scandal that have plagued other sectors of our financial services industry.”
In light of the recent problems that the insurance industry has faced, and given its significance to consumers and the economy, “the committee intends to remain engaged in this issue,” he added.
He said the Senate Banking Committee already has held one hearing on the oversight of the insurance industry, “and I intend to explore the issue further in the coming months.”
Mr. Shelby’s comments heighten recent speculation that he would support the “federal standards” legislation for insurance now being drafted in the House Financial Services Committee.
Some industry officials believe that despite opposition from state regulators and legislators, as well as some consumer groups, the House panel–led by Reps. Mike Oxley, R-Ohio, and Richard Baker, R-La. –intends to introduce such legislation, commonly called the SMART (State Modernization and Regulatory Transparency) Act, this summer and report it out of the committee.
(For related news on this debate, see pages 6 and 7.)
Quotebox, with Shelby mug:
“If it is determined that the insurance markets are now over the shocks of Sept. 11, I believe that Congress should let the federal backstop expire.”
Sen. Richard Shelby, R-Ala., Chairman
Senate Banking Committee
Pullquote with Joel Wood mug:
“Chairman Shelby asks exactly the right questions: Has the industry recovered since 9/11, and does it have the global capacity to get its arms around the risks associated with terrorism?”
Joel Wood, V.P., Gov’t Affairs