Group Proposes Compromise TRIA Extension Bill

WASHINGTON–Compromise language has been proposed by a joint insurance industry/policyholder group that is likely to narrow the gap between large and smaller insurers over details of legislation extending insurers' terrorism protection.

At the same time, language in the insurance trade group/policyholder group proposal regarding chemical, nuclear, biological and radiological risk is still likely to make the smaller insurers “uncomfortable,” several industry lobbyists familiar with the rift said.

The compromise for a measure extending the Terrorism Risk Insurance Act is being proposed by the American Insurance Association and the Coalition to Insure Against Terrorism.

The groups' new language is being suggested in order to win support from the Property Casualty Insurers Association of America and the National Association of Mutual Insurance Companies.

They had written a letter April 24 objecting to the AIA/CIAT proposal, saying it was unrealistic for the small insurers they represent to accept such huge risks from a potential terrorist attack.

The compromise language calls for an “event trigger that provides meaningful opportunity for small-company participation,” according to AIA spokesman Dennis Kelly.

Earlier language in the AIA/CIAT proposal had called for accepting a 20 percent “trigger” level–that is, with the insurers paying off the first 20 percent of claims from a terrorism attack before the government pays anything toward settling a claim. That is the level in the current version of TRIA.

The smaller insurers had said in a letter to AIA and CIAT that “lowering insurer retentions below the current 20 percent is very important to the medium-sized and smaller insurers.”

“The document appears to accept the 20 percent level as a permanent feature of the program without considering the consumer benefits of lower retentions,” the letter said.

The concern about the CNBR provision in the AIA/CIAT proposal is that it implied industry support for a provision in legislation extending TRIA that insurers would be forced to sell insurance covering such attacks–the so-called “make available” provision–but the federal government would step in to cover losses only above a certain amount.

The position of the smaller insurers is that insuring against CNBR to any extent is beyond their resources.

The current TRIA legislation expires Dec. 31, and the Democratic leadership in both the House and the Senate has vowed to both extend and expand the current provisions in TRIA.

However, Republicans in Congress are much more reluctant to extend and expand the bill, and the Bush administration is also opposed, although it is unlikely to veto any legislation that is finally hammered out by Congress, according to lobbyists and congressional staff.

A PCI official said yesterday that the trade group would have no comment on the compromise language being circulated by AIA/CIAT, saying the ball is “in the AIA's court.”

Mr. Kelly of AIA confirmed that talks were continuing. He said there were “very little differences” between the AIA/CIAT position and that of PCI/NAMIC.

“What has come out of talks since we released the principles is that the language related to the trigger provisions is stronger,” Mr. Kelly said, confirming the “language was strengthened to call for an event-trigger that 'provides meaningful opportunity for small company participation.'”

“That means we want anything done to lower the trigger,” he said.

He also contended that the wording is “recommended principles,” Mr. Kelly said. “There is nothing set here in stone.”