WASHINGTON–Legislation extending the Terrorism Risk Insurance Act for 10 years cleared its first key hurdle late yesterday when a House Financial Services Subcommittee approved it and sent it to the full committee for further action.

The bill, the Terrorism Risk Insurance Revision and Extension Act, or HR 2761, would extend the current government backstop for insurers against major terrorism losses when that measure expires on Dec. 31.

Subcommittee approval for the new measure came on a 24-19 vote, with mostly Republicans voting in opposition, primarily because the program is extended for so long and because it is far more expansive than the two prior bills dealing with the program.

One of the additions in the bill is the elimination of the distinction between foreign and domestic terrorism. Other new provisions mandate coverage for nuclear, biological, chemical or radiological (NBCR) attacks and establish greater government support for them than for conventional attacks.

The next action will be in the full committee, probably next Tuesday. Floor action in the House is unlikely until Congress returns in September after a four-week break scheduled to begin Aug. 3.

But the Senate Banking Committee is considering acting on its own version of the bill on Aug. 1. Specifics of that measure have yet to be unveiled.

Yesterday a late, unexpected amendment by Rep. Richard Baker, R-La., that expands a so-called “reset” provision to cover all areas for terrorism, not just high-density urban areas, spells problems for that provision, which is a priority for New York legislators.

Rep. Baker's amendment changed the legislation's “reset provision,” which would lower the deductible and threshold for government intervention in the event of an attack on particularly high-visibility, high-density targets.

His proposal did not seek to remove the proposal as expected but instead expanded the “reset” to the entire country.

With that action, insurance industry lobbyists said, he made it extremely unlikely that the more conservative Senate, and a Bush administration that would like to see the entire program go away, would accept any part of the provision.

“There is, in essence, a reset for everybody,” Rep. Baker said of the amendment, which would lower the threshold for federal involvement in the aftermath of a terrorist attack to the level included in the original Terrorism Risk Insurance Act of $5 million.

Democrats on the subcommittee expressed surprise at the expanded reset proposal, with Rep. Michael Capuano, D-Mass., noting that he “came prepared to debate the reset provision,” but not in the way proposed by Rep. Baker.

The subcommittee's chairman, Rep. Paul Kanjorski, D-Penn, also expressed surprise and said he opposed the reset provision.

“One of the reasons I did not become an original co-sponsor of this bill was the reset,” he said, adding that the provision as it had been drafted was “grossly unfair” to other areas of the country.

Rep. Kanjorski, as well as others, questioned whether the $5 million loss reset threshold that was proposed is too low, and Rep. Baker acknowledged that much of the opposition the amendment will spark would come “from my [Republican] side” of the aisle.

The amendment was adopted, but both Rep. Baker and Democrats on the panel said they would work further on the issue to find a number that would make for a more palatable threshold.

The “make available” provision for NBCR attacks was the subject of another proposed amendment, offered by Rep. Donald Manzullo, R-Ill.

Rep. Manzullo's proposal would have allowed state insurance regulators to exempt small insurers from the “make available” provision. While Democrats, including Rep. Capuano, said they understood the concept behind the proposal, they were hesitant to open the federal law to interpretation by state officials.

If the states are allowed to exempt companies, noted Rep. Gary Ackerman, D-N.Y., “you're going to slash this thing 50 different ways.”

The proposed legislation already delays implementation of the NBCR provision for small companies until 2009, and Rep. Manzullo withdrew his amendment after receiving assurances Democrats would work with him to make it more amenable for the full committee's markup of the bill next week. Rep. Baker also agreed to withdraw four amendments along the same lines.

The only other provision added to the bill by the subcommittee would establish a role for the Department of Homeland Security in certifying that an event was a terrorist attack. Three other amendments, all proposed by Republicans, sought to reduce the amount of time the program would be extended for, and were voted down.

Insurance industry groups hailed the committee's approval of the bill and Baker's amendment.

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