Insurers Now On Plan B For TRIA Extension

Industry sources said the House Republican leadership reacted by pulling the bill from the floor after House Democrats refused backing for the measure with the extension period cut from two years to six months at the request of House Majority Leader Tom DeLay, R-Texas.

The TRIA extension is now the insurance industry's priority for the lame duck session, scheduled to begin in mid-November, after the election when the House is due to return. Its importance was outlined Sunday by Mike McGavick, chief executive officer of Safeco Insurance.

In comments during a session at the annual meeting of the Independent Insurance Agents and Brokers of America, Mr. McGavick said, "The fact is that the failure to extend TRIA is already costing companies money as they have to prepare the policies you will be selling for a world that might not have TRIA beyond the end of the term in 2005.

"This is an urgent, urgent, right-now issue. Companies are already preparing to have some exclusions in place (in the event TRIA is not extended)."

The bill has broad support amongst rank-and-file members, but several Republican leaders, specifically House Majority Leader Tom DeLay, R-Texas, and Senate Banking Committee Chairman Richard Shelby, R-Ala., have voiced concerns about it.

Votes from the Democratic minority were needed to pass the measure Friday because the House Republican leadership had decided to put the bill on the floor under the so-called suspension calendar, an expedited process for legislation. That process, however, requires a two-thirds majority to pass.

The final legislation as negotiated by a number of House members mirrored the version reported out by the House Financial Services Committee Sept. 29 except for the cut in the time frame. The six-month period was insisted on by Rep. DeLay, a conservative concerned that the legislation would provide another unfunded federal liability.

It did, however, add a provision that would have required the Treasury Dept. to report to the Congress on the utility of the legislation by April; the current bill says the study has to be completed by June.

The insurance industry and its supporters in the House worked intensely during the day Friday to improve the legislation. The bill as approved by the House Republican leadership, especially Rep. DeLay, was for a six-month extension of existing legislation to June 30, 2006, deleted a provision adding group life and raised the retention rate for insurers from 15 percent, the level set in the bill reported out by the House Financial Services Committee, to 17.5 percent.

But strong lobbying by the insurance industry and its supporters in the House persuaded the House leadership to return to the 15 percent retention rate for the industry for the six-month extension, and to put group life back into the bill.

David Winston, senior vice president, federal affairs, for the National Association of Mutual Insurance Companies, said around 3 p.m. Friday that his trade group was conducting a grass roots campaign that seeks to win the support of House Democrats for the stripped-down bill. Other lobbying groups also asked their member companies to lobby Democrats, clearly to no avail.

Legislation extending TRIA through 2007 passed the House Financial Services Committee overwhelmingly Sept. 29. The bill also maintained 2005′s retention rate of 15 percent for 2006, and increased it to 20 percent for 2007.

The legislation also included group life insurance for the first time.

However, Mr. DeLay would not support the two-year extension because he is concerned about the U.S. government's adding another unfunded liability to its books. Regional interests were also at issue, because most of the cost the government has borne so far for terrorism activities is in urban areas, while Mr. DeLay represents an exurban and rural district near Houston.

Reps. Mike Oxley, R-Ohio, chairman of the Financial Services panel, Richard Baker, R-La., chairman of the committee's Capital Markets Subcommittee, and Spencer Bachus, R-Ala., chairman of the panel's Financial Institutions and Consumer Credit Subcommittee, had worked to persuade the House leadership to deal with the bill before recessing.

Even if the extension passes the House in November, it faces a significant obstacle in Sen. Shelby. He has insisted that Congress delay action on it until a report by the Treasury Dept. dealing with the need for the legislation is completed. That is not expected to be completed until next June. However, the legislation as agreed to by the House leadership Friday afternoon before being pulled mandates that the study be completed by April.