WASHINGTON–An effort to clear the way for expedited action in the Senate on legislation extending federal support for terrorism insurance was stalled yesterday, cutting the time for action before current supports expire Dec. 31.

Leadership of the Senate Banking Committee had taken steps to resolve a critical budget issue in the bill but still failed to obtain unanimous support for rapid action on the bill.

An industry lobbyist who asked not to be named cautioned that despite the fact at least one senator signaled that he has concerns with the bill, there is always the possibility the Democratic Senate leadership could still decide to put the bill on the floor by Friday–when Congress leaves for a two-week Thanksgiving recess.

The legislation being proposed by the leadership of the Senate Banking Committee would revise the law providing federal supports for terrorism insurance, with higher costs for commercial policyholders after an attack, sources said.

According to insurance industry lobbyists, who declined to be named, the proposal being floated by the leadership of the Senate Banking Committee would involve an increased surcharge to policyholders for anything below a $27.5 billion terrorism loss.

Currently after a $100 million event the government pays for 80 percent of insurers' losses and commercial policyholders are required to pay a 3 percent surcharge until the government is repaid.

The legislation being proposed would increase the current 3 percent surcharge by an unknown amount after a medium-sized terrorism event, insurance industry representatives said.

The Senate Democratic leadership, along with Sen. Chris Dodd, D-Conn., and Richard Shelby, R-Ala., the chairman and ranking minority member of the Senate Banking Committee, sought Monday to secure unanimous support for floor action but were unable to do so, several industry lobbyists said.

The prompt repayment, or “recoupment,” of some federal monies being proposed under the legislation is designed to deal with budget issues that have emerged as a major hurdle to extending the current Terrorism Risk Insurance Act.

According to Congressional Budget Office projections, the Senate bill would cost the government $5.1 billion over its seven-year life.

By contrast, the legislation proposed in the House carries an $8.4 billion price tag. Several lobbyists and Senate Banking staffers said the CBO was still doing modeling Monday in an effort to ensure that “accelerated recoupment will yield a net zero” cost to the government.

The current House proposal attempts to deal with the budget issue without cutting other programs or raising revenues to pay for it–a requirement under House pay-as-you-go rules. It would call for a second authorization vote to appropriate government funds to pay for a sizable terrorism attack.

Some House Republicans have rejected this approach when the issue reached the House floor, voting against the bill rather than accept what some have called a “voodoo” approach to dealing with the budget issue.

Under the current TRIA bill, the government becomes involved once an event reaches $100 million. The insurers involved pay the first 20 percent of the cost, with the government paying the remainder. Then, all commercial policyholders would pay an annual 3 percent surcharge on their policies to a maximum of $27.5 billion. “If losses exceed that figure, it's up to the discretion of the Treasury Secretary whether there will be recoupment,” according to representatives for two insurer trade groups.

Congress returns to work Dec. 3. But action on the bill this week would allow congressional staff to meet with House officials to discuss proposed compromises that would allow prompt action on final legislation when Congress returns.

The decision by the committee leadership to gauge support was made after insurance lobbyists told Senate Banking Committee staff that their proposed solution for reconciling the budget dilemma would be acceptable to their industry.

The industry lobbyists were asked for their opinion after officials of the Congressional Budget Office indicated they would support the proposal drafted by the Senate Banking staffers by giving it a “zero” budget cost.

According to the lobbyists, officials of several trade groups, who are leading the industry effort to resolve the budget issue, said their opinion would be that the industry would accept the compromise in order to resolve the budget issue and end the uncertainty that no legislation to extend the current program would be in place by Dec. 31, when the current program expires.

The speedier repayment schedule is one of the few differences between the proposed legislation and current law under the Senate bill.

But the fact that the bill would extend the program for seven years, far greater than the current two-year extension which expires Dec. 31, and the fact that the Bush administration says it will not veto such an extension appears to give the Senate bill a better chance of being enacted than the more expansive House bill, according to industry lobbyists.

They asked that their names not be used because they were not authorized to speak on the matter and were concerned it would jeopardize their relationships with Senate staff and lawmakers.

Based on their comments, insurers would rather accept the Senate version, even with the prompt recoupment provision, rather than accept the recent proposal of Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, for an extension of the current program until April 30 so that more of the House bill can be included in final legislation.

This article updated Nov. 14, 9:56 a.m. EST

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Senate TRIA Bill Hits Snag

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