House Senate TRIA Bills Compared
There are key differences between the House and Senate versions of legislation extending the Terrorism Risk Insurance Act.
A House-Senate conference to resolve differences in the bills is likely to be held before Congress adjourns for the year by the target date of Dec. 17.
Under congressional rules, Rep. Mike Oxley, R-Ohio, chairman of the House Financial Services Committee, will chair the conference committee.
Unlike the House version, the Senate bill terminates the TRIA program on December 31, 2007. By contrast, the House bill contemplates either a pooling mechanism or an extension of TRIA beyond that date with a scheduled increase in deductibles.
The event loss levels that trigger federal support are the same in both bills–$50 million in 2006 and $100 million in 2007.
The House bill expands the lines of coverage and adds group life, while the Senate bill diminishes TRIA coverage.
The coverage areas removed from the Senate bill include commercial auto, professional liability, surety, burglary and theft, and farmowners' multi-peril.
The deductibles in the Senate version are lower and across the board as contrasted with the silo approach taken by the House version, which has different deductibles for each line of coverage.
The Senate bill calls for a 17.5 percent retention level for insurers across all lines of business in the first year, and 20 percent in the second year.
Under the existing legislation, deductibles are 15 percent, all lines of insurance except group life are covered, and the trigger level for federal involvement is $5 million, a provision added at the time the bill was drafted in 2002 to ensure that small insurers struck with an isolated event outside a major urban area would not be wiped out.
Most significantly, the Senate bill would terminate after the second year.
The House bill calls for different retention levels for industry based on lines of business.
Specifically, workers' compensation would have a 16 percent level the first year of renewal and 18 percent in the second year; property, 20 percent in the first year and 22.5 percent in the second year; group life, 21.5 percent in the first year and 24 percent in the second year; casualty, 25 percent in the first year and 30 percent in the second year; and NBCR (nuclear, biological, chemical and radiation), 7.5 percent in the first year and 8.25 percent the second year.
The House bill contains language added at markup that would significantly streamline surplus lines laws.
It would do so by mandating that "sophisticated" commercial purchasers of commercial coverage that includes terrorism could bypass state rules requiring them to have a domestic carrier decline to provide the coverage. Additionally, all other surplus lines policyholders (who buy insurance with terror cover on a multistate basis) would only have to abide by the declination rules in the state in which the insurance was placed.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.