The property and casualty insurance industry's eyes will befocused on the Senate Banking Committee and legislationreauthorizing the Terrorism Risk Insurance Act (TRIA) asCongress returns to work this week.

 S. 2244, is seen as the only available "engine" thisyear for legislation that the industry sees as important, not onlybecause reauthorization of the Terrorism Risk Insurance Act is apriority, but because the industry also wants to use the bill tolimit the Federal Reserve Board's ability to impose bank-centricrules on insurers, and well as ensure that state regulators remainrelevant as international insurance rules are crafted.

Wil Rijksen, a spokesman for the American Insurance Association,said AIA "anticipates that TRIA will be a priority for both theSenate Banking and House Financial Services Committees during thenext four to six weeks." 

Property and casualty insurers are voicing concern aboutprovisions of the Senate bill which would phase-in an increase inthe deductible for insurers from a catastrophic attack by 33% foreach company.

There are also concerns about what will happen to the Senatebill in the House in the wake of indictment of the lead sponsor ofthe House bill, Rep. Michael Grimm, R-N.Y., today. He was indictedin Brooklyn on federal charges of underreporting payroll whilerunning an Upper East Side restaurant. The probe started onallegations of illegal fund-raising.

PC insurers want prompt action on the legislation, as noted byAIA president and CEO, because market uncertainty "is beginning toemerge with TRIA's looming expiration, reinforcing the importantbenefit of maintaining the public-private partnership establishedby the law."

No insurance industry source would speculate on the potentialimpact of Grimm's legal problems on House consideration ofreauthorization legislation.

In a letter to members of the Senate Banking Committee lastweek, officials of the Property Casualty Insurers Association ofAmerica and the National Association of Mutual Insurance Cos.sought to investigate efforts to impose European-style capitalstandards on insurance companies despite objections from U.S. stateregulators.

In an investment note, Ryan Schoen and Stuart Paul of WashingtonAnalysis expect insurers to strongly support amendments to theSenate bill that, amongst other provisions, create a larger rolefor the National Association of Insurance Commissioners (NAIC) inproviding input for new insurance regulations.

Such a provision would likely be included in legislation Schoenand Paul expect Sen. Susan Collins, R-Maine, to introduce in hopesit is attached to the TRIA bill.

They expect her bill to seek to exempt insurers subject tofederal regulation from bank-centric leverage- and risk-basedcapital requirements, so long as their activities are subject tostate insurance regulation.

They said such legislation "will quickly attract the support ofthe 25 Senators who have co-sponsored legislation from SherrodBrown, D-Ohio, and Mike Johanns, R-Neb.,  that wouldexplicitly allow the Fed to "establish capital standards that areproperly tailored to the unique characteristics of the business ofinsurance."

They also expect Collins to "explicitly carve out insurers" fromthe Collins Amendment, legislation she attached to the Dodd-Frankfinancial services reform act insurers which are subject toconsolidated regulation by the Fed additional flexibility thatwould allow them the flexibility o continue using statutory insteadof GAAP accounting practices.

The PCI/NAMIC letter seeking a hearing on internationalregulation asks the Senate panel to focus on the potential impacton consumers of ongoing efforts by international regulators to seta new global capital standard for internationally active insurers,even U.S.-based insurers already subject to the state-basedsystem.

"This one-size-fits-all approach is being advocated over thestrong objection of the states, who are the regulators in the U.S.for the business of insurance, without demonstration of need orconcern for the loss of consumer focus, significant consumer costsand other negative impacts on our market," PCI and NAMIC said inthe letter.

At the heart of the issue, according to Jimi Grande, senior vicepresident of federal and political affairs for NAMIC, is the factthat the U.S. and European systems differ greatly in theirfocus.

"There's a clear distinction between how we regulate insuranceand what other nations do," he said. "The state-based regulatorysystem we have is designed to allow for a competitive marketplacewhile, at the same time, using mechanisms like guaranty funds toensure that claims will still be paid should an insurer fail."

Grande said that the focus overseas is to prevent any companyfrom failing so that bond holders, equity holders, and otherclaimants are protected, "and that requires a higher capitalstandard than is appropriate in our regulatory structure."

The letter added that in the view of PCI and NAMIC, Congresswould find in examining the issue that "European standards wouldultimately create needless and costly regulatory burdens forinsurers and their policyholders while providing no added benefitto anyone."