TRIA Extension May Be Delayed 'Till Mid ?05

Most insurance industry lobbyists are putting a brave face on Congress' unwillingness to act before departing last weekend, saying that they have hopes that an extension can be included in omnibus legislation that will be acted on during a short lame-duck session to be convened in mid-November.

But the reality is that the last few days before the House departed on Saturday and the Senate Monday, were the last best opportunity for extension of TRIA during this Congress.

A compromise bill acceptable to House Republicans that would have extended the law from the current Dec. 31, 2005 expiration to June 30, 2006, was pulled late last Friday from the House docket when Democrats balked after the extension period was cut from two years to six months.

Moreover, it would have been an uphill battle to move it through the Senate because Sen. Richard Shelby, R-Ala., chairman of the Senate Banking Committee, had repeatedly made clear he did not want to act on an extension until the Treasury completes its report evaluating the effectiveness of the current law and the utility of extending it.

Responding to Congress' failure to act on the extension, Julie Rochman, senior vice president of public affairs for the American Insurance Association in Washington said, "The TRIA extension has to get done, it must get done, it will get done."

Ms. Rochman added that the AIA believes "that the policyholder community is really stepping up the amount of energy and attention they are giving this issue and we are looking for vehicles during the lame duck session to attach it to, and, if we don't get it done in the lame duck, we will continue our efforts as soon as the gavel comes down in 2005."

Regarding reports that Sen. Shelby plans to hold hearings on the issue in March and craft legislation based on the Treasury report when it is completed in June, Ms. Rochman said, "I believe that is possible that Congress will act in the spring, before the Treasury study comes back."

But, she added, Sen. Shelby "has been very clear and consistent that he wants to see the results of the Treasury study before acting. And he is very important to this legislation."

Joel Wood, senior vice president for government affairs for the Council of Insurance Agents and Brokers, said that, "Given the limited appetite by congressional leaders for a lengthy lame-duck session, winning a TRIA extension would be difficult, but it's certainly worth trying."

Mr. Wood explained that the politics of this issue will be driven by market dislocation, and so his group expects to see extensive use of the policy language drafted by Insurance Services Office in Jersey City, N.J., which provides for exclusion of terrorism coverage for policies issued after Jan. 1, 2005.

He warned that, "Given the mandatory coverages of fire-following and workers' compensation, plus potential actions by individual state regulators to force coverage, the industry will be put in an extremely difficult position."

Congressional action would help avoid "chaotic market conditions," Mr. Wood added, and we remain highly optimistic that in the end, Congress will respond appropriately to this obvious need. It's just that it may be ugly getting there."

David Winston, federal affairs senior vice president for the National Association of Mutual Insurers, agreed. "The Terrorism Risk Insurance Act's (TRIA) hard end date of Dec. 31 poses a huge problem for commercial insurance policies taking effect on or after Jan. 1, 2005, as the end of the typical one-year policy will extend beyond the sunset date."

Mr. Winston added that, "This period over the next few months is critical. An absence of the TRIA reinsurance backstop will cause major uncertainty ? this is bad for business and bad for our economic recovery."

Carl Parks, senior vice president for government affairs at the Property Casualty Insurers Association of America, added that, "Clearly, we would have liked Congress to act on a TRIA extension before it recessed for the elections.

"However, the year is not out, and despite the long odds for action in the lame-duck session we will continue to push for prompt congressional action."

If Congress does not act this year, working to extend TRIA "will be the first thing we address with Members next year. The fight to
extend TRIA is not over by any means," said Mr. Parks.

At the same time, insurers who do business in urban areas are being warned that they need to examine their business plans to
ensure that they understand how both TRIA and
the unfair discrimination law could affect their business, according to officials at the Urban Insurance Partners Institute (UIPI).

Mike Trier, a partner at Lord, Bissell & Brook, based in Chicago, said that his firm is advising companies to create an ongoing compliance team that reviews policies and endorsements. "Since the reauthorization of TRIA for periods after Dec. 31, 2005, is still uncertain, it is important to prepare now for both a hard and soft landing when TRIA terminates."

Suzanne Reade president of the Urban Insurance Partners Institute, which will hold a seminar on the issue Oct. 27 in Chicago, said that "TRIA was meant to be a temporary solution, and we understand that TRIA's congressional backers are reluctant to extend the program beyond 2007." Ms. Reade added that, "Companies should make sure that in an effort to limit their long-term exposure, they don't take any legal missteps in the urban arena."