Washington–The removal of indicted Rep. Tom DeLay, as House majority leader eliminates a major stumbling block for terrorism insurance backstop legislation sought by insurance interests, according to a confidential industry assessment.
Mr. DeLay, R-Texas, known as "The Hammer," was forced to step from his party post yesterday after being charged with campaign finance violations.
The development "has significant consequences" for extension of the Terrorism Risk Insurance Act, according to a private memo obtained by National Underwriter which was sent to members of the Council of Insurance Agents and Brokers by their top Washington lobbyist.
Joel Wood, the CIAB's senior vice president for government affairs, who wrote the memo, declined through a representative to elaborate on his analysis, or even confirm that it had been sent.
"Congressman DeLay was a major obstacle in passage of a two-year extension of TRIA last year," Mr. Wood said in the memo.
He added that Rep. DeLay "has pledged to do his best to block any straightforward extension of TRIA this year unless the federal backstop program was significantly scaled back or significantly altered to make it appear to be more of a private sector solution to the problem of terrorism coverage."
The representative for Mr. Wood, asked to confirm the comments, said the CIAB wanted to make it clear that "Mr. DeLay's staff has been working very constructively with the House Financial Services Committee to develop significant alternative proposals" to the current TRIA bill. He would not comment further.
Insiders in Washington viewed the CIAB's reluctance to confirm authorship of a memo that might antagonize the congressman as understandable given Mr. Delay's the reputation that earned his nickname in Congress and the possibility that he could return with even more power if his legal problems are resolved in his favor.
In fact, other insurance industry officials were loathe to be associated with anything that could be seen as jumping on Rep. DeLay's political grave. "I won't go anywhere near that," one influential and deep-pocketed lobbyist said==a refrain repeated by most insurance group representatives.
Meanwhile, renewal of legislation protecting commercial policyholders from the risks of terrorism now has a renewed focus as the industry's top legislative priority. Rep. DeLay was seen as a virtually insurmountable roadblock to renewal of TRIA for any length of time and in any form acceptable to insurers.
Suggested legislative language unveiled by staff officials of the House Financial Services Committee majority that tracks the Treasury's recommendations on TRIA is running into strong industry opposition, especially from smaller insurers.
According to a memo to the committee from the National Association of Mutual Insurers a trigger of $500 million with deductibles of 20 percent and 25 percent for the next two years, including an industry loss share of 15 percent, "is likely to drive out 81 percent of the private insurance market."
Those numbers are similar to the ones proposed in the committee majority staff memo. The NAMIC memo adds: "This will lead to the creation of an oligopoly in terror-prone areas, as only a relatively small number of large companies will be able to offer coverage. Small- to mid-size companies will be forced to exit the market without a meaningful federal backstop or private reinsurance market."
Rep. DeLay's opposition to renewal of TRIA in its present form, with support from the White House, stems from his view that terrorism reinsurance is of interest only to the so-called "Blue States" that provide little support for Republicans, and that renewal of TRIA is not a major issue to core Republican voters, insurance lobbyists believe.
Their thinking now is that with Rep. DeLay playing a lesser role in the operations of Congress, a strong majority will feel free to vote their conscience and extend TRIA in a form acceptable to the insurance industry==although for how long and under what parameters remains unclear.
Still, even given Rep. DeLay's lesser role, "it would be a mistake to assume that TRIA extension now has an easy ride," Mr. Wood wrote in his memo. He noted that Rep. DeLay "will remain a member of the House, and a very consequential one."
Moreover, Mr. Wood said, the Bush administration's Treasury Department and Sen. Richard Shelby, R-Ala., chairman of the Senate Banking Committee, "have indicated that they intend to support a stripped down, short-term extension of TRIA."
At the same time, Mr. Wood said, House Speaker Dennis Hastert, R-Ill., has appointed Rep. David Dreier, R-Calif., currently chairman of the House Rules Committee, to assume new leadership duties. "Rep. Dreier has been friendly to the insurance/policyholder community on the TRIA issue in the past," Mr. Wood advised.
Congress will have some time to deal with the issue because Mr. Wood said Congress could be around until Thanksgiving, or "perhaps beyond." Given that, he added, "Hopefully, the tragedy of Katrina will remind policymakers of the necessity of securing the economy through catastrophic insurance coverage."
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