Insurers Uneasy As Bush Official Ducks TRIA Q & A

Insurer representatives were hoping to hear something at the conference on financial institution regulatory reform organized by Baker & Daniels-Sagamore law and consulting firm, because TRIA, the federal backstop for terrorism losses, which is due to expire Dec. 31, is a measure they view as essential.

The so-called "summit" today took center stage because a Senate Banking Committee hearing regarding the success of TRIA that was scheduled to take place at the same time was postponed because one of the ranking Democratic members of the committee was not able to attend. The meeting is expected to be held later this month.

On the TRIA topic, Mr. Zerzan spoke from a prepared text. He even declined to make a substantive response when the Washington, D.C. insurance regulator, Larry Mirel, told him that TRIA was "not an unqualified success" because of affordability and availability concerns in urban areas, like Washington, D.C. and New York.

Indeed, Mr. Zerzan wouldn't make a substantive response when asked by an official of the American Council of Life Insurers "to please consider the group life industry" when evaluating whether TRIA should be extended, and what shape it would take.

All Mr. Zerzan would say is that the Treasury has just sent out the last of the survey forms it is asking the industry to respond to as it prepares a report on TRIA's viability over the last 30 months.

Congress has required the report be presented to it by June 30. Mr. Zerzan said that the administration wants to complete the report "as soon as possible."

Industry representatives had been hopeful that Mr. Zerzan would give some inkling as to administration support for extension of TRIA, and what shape an administration-sponsored bill would take.

Mr. Zerzan's office is responsible for drafting the report that industry officials believe will play a key role in their efforts to get TRIA extended, and to win a commitment for a long-term "public/private partnership" on terrorism coverage, as well as specific coverage for nuclear, chemical, biological and radiation attacks.

Mr. Zerzan acknowledged that such coverage is not specifically mentioned in the current TRIA bill.

On another topic at the conference, Rep. Barney Frank, D-Mass., ranking minority member of the House Financial Services Committee, appeared to throw cold water on congressional support for optional federal chartering of insurers.

The support of Rep. Frank, and other Democrats, would be crucial as Congress considers how it would reshape the current, state-based insurance regulation format.

In response to a question, Rep. Frank said his perception of the shape of federal intervention in insurance regulation would be to "require states to defer to other states," i.e., encouraging interstate compacts and reciprocity.

However, Mr. Frank implied that he would support legislation facilitating such reciprocity only for the life industry. "Property-casualty regulation must remain local," he stated emphatically.

Rep. Frank declined to support an optional federal charter when asked directly for his views by a representative of the American Bankers Association, who mentioned during his question that the ABA strongly supports such an option.

His reasoning was that majority Republicans had supported litigation reform that puts more cases in federal court and giving federal banking regulators strong powers that reduced the role of the states in regulation.

Rep. Frank said the overall meaning of the current trend toward new powerful federal regulators and new laws is that Republicans are saying, "States stink."

"You can have uniform national standards," he said, "but not wipe out the states." Federal regulators, he added, are concerned about systemic risk and not consumer protection.