TRIA Extension Gains Momentum In Congress

The plan is then to move the bill through the House within the subsequent 10 days, under an accelerated procedure known as the suspension calendar, according to Julie Gackenbach, assistant vice president of government relations at the Des Plaines, Ill.-based Property Casualty Insurers Association of America.

Rep. Mike Oxley, R-Ohio, chairman of the panel, indicated that enactment of the bill had become a priority for his panel. "Rep. Oxley, by moving this quickly through the normal committee process and on to the floor, is retaining all of his legislation options for moving the bill this year," Ms. Gackenbach said.

Equally important, strong support for the legislation was expressed for the bill during a Senate Banking Committee hearing last week on insurance regulation. All senators except the committee chairman Richard Shelby, R-Ala. voiced support for the bill.

Sen. Shelby had indicated earlier in the week that he wanted to hold off action until next year so a hearing could be held on the issue. However, given the near-unanimous show of hands when members of the panel were asked to indicate their support for the TRIA extension bill by Sen. Charles Schumer, D-N.Y., it appears that the chairman will go along with passage this year.

Only J. Robert Hunter, insurance director of the Consumer Federation of America in Washington, raised his hand when Sen. Schumer asked during the hearing who opposed extending TRIA.

"Senators get it that this needs to be done, and it needs to be done expeditiously," Ms. Gackenbach said. "Our preference is to move this bill as soon as possible. Were moving into some pretty significant dates for people seeking to negotiate new contracts. So the earlier we can complete this action, the better it is for policyholders and insurers."

The bill to be taken up by the House committee was introduced in July by Reps. Richard Baker, R-La., who chairs the Capital Markets Subcommittee of the panel, and Pete Sessions, R-Texas. It would extend the current TRIA legislation for two years, retaining the 15 percent individual company retention level scheduled to go into effect on Jan. 1, 2005 through 2006, and increase that to 20 percent in 2007.

Similar legislation has been introduced in the Senate by Sens. Robert Bennett, R-Utah, and Chris Dodd, D-Conn. The only concern with the bill is that it provides "no soft landing." That is, there will be a hard cutoff date of Dec. 31, 2007meaning that insurers extending contracts during 2007 would retain responsibility for paying claims during the period in 2008 until the contracts expire, even though the federal backstop would no longer be available, which is the same problem the industry is concerned with now. The bill "doesn't solve that problem," Ms. Gackenbach said.

A representative of the Council of Insurance Agents and Brokers in Washington explained in detail the importance of the bill and why it was "urgent" that Congress extend TRIA in testimony at the Senate hearing on insurance regulation.

"The need for federal action in the area of terrorism coverage is a clear example of the limits of state regulation," said Albert R. Counselman, president and CEO of Riggs, Counselman, Michaels & Downes Inc. in Baltimore, and past chairman of the CIAB.

"Now, as we look forward to the third and final year of TRIA's current life, the evidence is mounting that TRIA is effective and that purchase of terrorism coverage is increasing," he said. "It has also become evident, however, that the private marketplace will not be prepared to take on the full risk posed by potentially catastrophic terrorism losses by the time the law expires on Dec. 31, 2005. Thus, it is imperative that TRIA be extended."

Mr. Counselman explained that when TRIA was enacted, the intent of Congress was to create a short-term federal backstop to allow insurance markets to gradually assume, and learn to price, terrorism risk an exposure that had previously been insured at no additional cost over the standard policy premium.

"As TRIA enters the third and last year of its original life-span, it is clear that the capacity of the private market to provide terrorism risk coverage will require more time to fully develop," he said.

"A comprehensive and accurate terrorism risk model is necessary for a private terrorism insurance and reinsurance market to take root," he explained. "Development of such a model, however, remains elusive. Risk modeling is a complex and difficult process. Terrorism risk modeling is all the more difficult because of the unique nature of the terrorist threat, the element of human intent, and the limited historical precedents available to provide data for predicting future events."

New York Insurance Superintendent Greg Serio, representing both his state and the National Association of Insurance Commissioners as chairman of its Government Affairs Task Force, also emphasized during his testimony that "nothing more important" can be done by Congress than extending TRIA. "Time is of the essence in terms of promoting and moving TRIA along," he said.

Reproduced from National Underwriter Edition, September 23, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.