Reset Provision Stirs New TRIA Debate

WASHINGTON–Lawmakers pushing for legislative language providing incentives for insurers to cover terrorism in prime target areas will see how the concept fares next week when a committee meets to set the final form of the Terrorism Risk Insurance and Extension Act of 2007.

The TRIA extension bill (H.R. 2761) is due to come up for a first markup Tuesday by the Capital Markets Subcommittee of the House Financial Services Committee.

A new provision in the bill, which extends the federal terrorism reinsurance program, would provide a trigger and deductible break for those insuring areas previously hit by a terrorist attack–such as New York.

Rep. Gary Ackerman, D-N.Y., said he and Rep. Barney Frank, D-Mass., are lobbying strongly for a “reset” provision that would make it easier for insurers to underwrite terrorism coverage in areas hit by a previous attack–and charge lower rates than they would otherwise. It would have the same effect in the event of a future attack in other high-risk areas.

It does so by mandating that insurers get federal help sooner in the event of a subsequent attack through lower deductibles and triggers than those imposed in areas that have not been hit. Such would be the case for any “previously impacted area” designated by the Treasury.

Specifically, under the provision, insurer deductibles would be reduced by one percent for each $1 billion in aggregate industry losses resulting from an act of terrorism within the previously impacted area, except that deductibles cannot be reduced below 5 percent.

Similarly, the program trigger would be reduced by $10 million for each $1 billion in aggregate industry losses from an act of terrorism in such areas–except that the trigger cannot be reduced below $5 million.

TRIA extension has strong support in Congress, but H.R. 2761 could face problems because pg the reset provision, the length of the extension and other points are regarded in some quarters as representing a too expansive increase in the present program, which expires Dec. 31.

The bill, early on, received strong support within the insurance industry, because the legislation–drafted by Rep. Frank and Mike Capuano, D-Mass.–contains provisions insurers have been unable to secure in the two prior versions of the program, including coverage for coverage of nuclear, chemical, biological and radiation attacks.

Reps. Frank and Capuano also resisted pressure from small insurers to drop a provision mandating that all insurers “make available” coverage for NCBR risks.

The bill in general is expected to win overwhelming support from the committee. The current plan is for the subcommittee to report the bill out on Tuesday, and for the full committee to act on it Aug. 1. House floor action is expected soon after the House returns in early September.