Will DeLay Political Woes Boost Extension Of TRIA?

The legal problems of Rep. Tom "The Hammer" DeLay, R-Texas–forced to step aside as House Majority Leader last week after being charged with campaign finance violations–has given the property-casualty industry newfound optimism that a reasonable facsimile of the current Terrorism Risk Insurance Act can be sustained beyond its Dec. 31 expiration date.

A confidential memo from a top lobbyist for the Council of Insurance Agents and Brokers in Washington, sent to members after the DeLay indictment was announced, said the development "has significant consequences" for TRIA extension.

The memo, obtained by the National Underwriter, was written by Joel Wood, the CIAB's senior vice president for government affairs. Through a representative, Mr. Wood declined to elaborate on his memo, 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.

CIAB's reticence to antagonize Rep. DeLay is considered prudent by players here, given his reputation as "The Hammer" in Congress, and the fact 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 industry officials.

Still, last week's development was intriguing for insurers, as renewal of legislation protecting commercial policyholders from the risks of terrorism remains the industry's top legislative priority. Rep. DeLay constituted a virtually insurmountable roadblock to renewal of TRIA for any length of time and any acceptable form.

Indeed, 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.

For example, a memo provided to the committee staff by the National Association of Mutual Insurers said that 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-midsize 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, lobbyists here contend.

Now, however, the thinking is that with Rep. DeLay playing a lesser role in the operations of Congress, a strong majority will now 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," as Mr. Wood said in his memo. For example, Mr. Wood wrote 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 noted, 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 said.

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."

Rep. Tom "The Hammer" DeLay, charged with political corruption, constituted a virtually insurmountable roadblock to renewal of TRIA for any length of time and any acceptable form.