Budget Action Boosts Fate Of TRIA Extension

WASHINGTON–Congress, through its annual budget resolution process, has taken the first concrete step toward renewal of government supports for terrorism insurance for up to five years.

The resolution language gives the go-ahead for “various committees to act to ensure a continuing federal role in the continued availability of terrorism insurance” as long as it doesn't add to the budget deficit.

The budget document sets forth the appropriate budgetary levels through 2012 for all programs. While only advisory, it will allow for expedited handling of legislation renewing the Terrorism Risk Insurance Extension Act, which expires Dec. 31 and whose renewal is the top legislative priority for the property-casualty insurance industry.

In a clear compromise that reflects the lack of consensus on the issue at this time, the document gives “various committees” authority to extend the program as far as 2017.

At issue are the views of conservative Republicans and the White House, both of whom oppose an extension of the program out of concern it will create another unfunded federal liability, and the views of some House Democrats (mainly from New York), who argue that the program should be extended for 10 years or more.

Agreement on the budget reconciliation document was reached yesterday morning. Sen. Kent Conrad, D-N.D., chairman of the Senate Budget Committee and of the committee that reconciled the differing House/Senate version, told reporters he expected Congress to approve the bill tonight.

That will be none too soon for members of the House Financial Services Committee. Key subcommittee chairmen, including Rep. Paul Kanjorski, D-Pa., chairman of the Capital Markets Subcommittee, are already soliciting the industry on what an extension of the program should look like.

Senate congressional staff said they expect the House Financial Services Committee to act on a bill by mid-June.

Legislation renewing the program is now being drafted in the House Financial Services Committee and could be unveiled within the next month, according to industry lobbyists.

The House Democratic leadership has voiced support for renewing the program for up to five years, while Sen. Chris Dodd, D-Conn., chairman of the Senate Banking Committee, has suggested permanent renewal.

The insurance industry is having difficulty agreeing on what provisions it wants the bill to contain: Small insurers insist that the claims paid before federal help kicks in–the so-called “retention levels”–be reduced from the 20 percent level contained in the current legislation.

The industry is also trying to resolve differences created when the American Insurance Association entered into an agreement with the Coalition to Insure Against Terrorism, which represents policyholders.

Both groups support legislation that would require the government to provide specific coverage for nuclear, biological, chemical and radiological risks, and mandate that insurers make the coverage available to their policyholders.

Trade groups representing smaller insurers say providing such coverage is beyond their limited means, and they want the AIA to back off from support of such a provision.