House TRIA Bill Would Boost Retention

Insurance and real estate trade groups lauded introduction of the measure as a "positive sign" that Congress is interested in extending the federal reinsurance backstop.

Privately, however, insurance industry officials were less sanguine. They had been hopeful that Democrats would wait to introduce a bipartisan bill that headlined Rep. Mike Oxley, R-Ohio, who chairs the Financial Services Committee.

The industry is also concerned because the bill would raise the retention ratethe threshold level above which the government would cover losses suffered by an insurer in a domestic terrorism attackfrom the current 15 percent to 20 percent in the second year.

"The industry wants bipartisan agreement," said one key industry lobbyist who asked to remain anonymous. "We also dont like the current paradigm [for extension] and believe the current retention levels are too high already."

The industry is also concerned that the Bush Administration declined to signal its views on extension when a Treasury Department official spoke on the issue at a recent conference in Washington, sponsored by the Networks Financial Institute.

The "Terrorism Insurance Backstop Extension Act of 2005″ was introduced as H.R. 1153 by Rep. Mike Capuano, D-Mass., joined by Reps. Joe Crowley, D-N.Y., Barney Frank, D-Mass., Steve Israel, D-N.Y., and Paul Kanjorski, D-Pa.

The industry lobbyist said another concern with the bill is that it is consistent with industry fears that Congress will demand an increase in the retention rate to 20 percent or perhaps 25 percent as the price of enactment. "That is too costly, and for most insurers too high a price to pay," the lobbyist said.

However, most industry groups chose to look on the bright side. The American Insurance Association said introduction of the bill "shows that congressional members want to put significant bipartisan energy into protecting the U.S. economy against catastrophic terrorism."

Leigh Ann Pusey, AIAs senior vice president of government affairs, said "policyholders, insurers and many on Capitol Hill know that we need something after Dec. 31the end date for the Terrorism Risk Insurance Act of 2002." She added that "this momentum toward the commonly held goal of providing for a federal terrorism risk insurance program is welcome."

Ms. Pusey said the industry is "trying to be as constructive as possible," explaining that "ensuring a terrorism backstop is in place provides the economic stability needed so stakeholders may focus on working with the House and Senate to construct a long-term bipartisan solution."

Charles E. Symington Jr., senior vice president of federal government affairs at the Independent Insurance Agents & Brokers of America, said introduction of H.R. 1153 is a positive sign of continued support in Congress for a terrorism insurance backstop, vowing that the Big I "will continue to advocate for an appropriate terrorism program to ensure availability of insurance coverage for consumers."

"Catastrophic losses related to terrorist attacks continue to appear uninsurable, and we do not believe a federal terrorism backstop should be allowed to lapse," he added. "Should the program lapse, it could be difficult, if not impossible, for businesses to obtain insurance against losses related to terrorist acts, and that could have serious economic consequences in the event of another terrorist attack on American soil."

Martin L. DePoyvice president for government relations at the National Association of Real Estate Investment Trusts and representative for the Coalition to Insure Against Terrorismsaid the coalition "welcomes word" that the bill had been introduced in the House. "This is another sign of the growing Congressional commitment to maintain the nations economic security," he said.

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Whats In The House Bill?

Specifically, H.R. 1153the "Terrorism Insurance Backstop Extension Act of 2005″would do the following:

Extend TRIA by two years, to Dec. 31, 2007.

Raise the insurer retention rate from the current 15 percent to 20 percent in the second year.

Make it easier for businesses to get affordable terrorism insurance by including provisions to ensure that policies enacted during the last year of the program do not lose their terrorism coverage before the policy expires.

Provide mandatory availability for terrorism coverage for policies written in the final two years of the program.

Make terrorism reinsurance coverage available to group life insurance policies.

Require the Treasury Department to develop recommendations on long-term solutions to the terrorism reinsurance problem.

Reproduced from National Underwriter Edition, March 10, 2005. Copyright 2005 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.