Wait Til Next Year On TRIA

But the reality is that the last few days before Congress departed the House on Sat., Oct. 9, and the Senate last Monday represented the best effort to have TRIA extended in this Congress. A compromise bill acceptable to House Republicans that would have extended the law from the current Dec. 31, 2005 to June 30, 2006 was pulled late last Friday from the House docket when Democrats balked that the extension period had been cut from two years to six months.

Moreover, it will be an uphill battle to move it through the Senate because Sen. Richard Shelby, R-Ala., chairman of the Senate Banking Committee, repeatedly said he won't act on an extension until he has a Treasury report in front of him that evaluates 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, said, "The TRIA extension has to get done, it must get done, it will get done."

She also said that the AIA believes "the policyholder community is really stepping up the amount of energy and attention it is giving this issue." She added, "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 it 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, "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 we expect to see extensive use of the ISO exclusions on policies issued after January 1."

He explained,"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 said. "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 hard end date of December 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: "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."

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 businesses, according to officials at the Urban Insurance Partners Institute (UIPI).

Mike Trier, a partner at Lord, Bissell & Brook, a Chicago-based law firm, 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, "Companies should make sure that in an effort to limit their long-term exposure, they don't takeany legal missteps in the urban arena."

Reproduced from National Underwriter Edition, October 14, 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.