Cost Factor Ties Up Action On TRIA Extension

WASHINGTON–House action originally scheduled for Tuesday on legislation to extend federal supports for terrorism insurance has been delayed to Sept. 17 in a wrangle over cost issues involved with the measure, sources said.

The Congressional Budget Office in a report has estimated the legislation would cost more than $8 billion over 10 years, leading a consumer group to condemn the legislation as a grab for taxpayers money.

Originally, the bill, H.R. 2761, was due to be on the floor Sept. 11, on the anniversary of the 2001 terrorist attacks, at the same time Congress has a list of priority measures to work on before the current fiscal year closes Sept. 30. Congress will recess at noon Wednesday until Sept. 17 because of the Jewish New Year.

The current terrorism backstop for insurers is due to expire at year's end.

The first sign that action would be delayed on the terrorism risk insurance extension bill was a decision yesterday afternoon by the House Rules Committee to delay action on a rule that would set the time period for debate on the bill and determining which proposed amendments would be ruled in order.

Congressional staffers said the schedule was thrown off by Wednesday's death of Rep. Paul Gillmor, R-Ohio, whose funeral will be held Tuesday. Rep. Gillmor was a member of the committee.

But other sources said the real reason was a letter sent by the Congressional Budget Office Sept. 5 to Rep. Barney Frank, D-Mass., chairman of the panel and a principal sponsor of the bill. It said the net cost of the TRIA extension legislation over the next 5 years would be $3.5 billion, and over the next 10 years $8.4 billion.

A spokesman for Rep. Frank did not respond to requests for comment.

That unexpected news has sent the committee leadership scrambling, because under pay-as-you-go rules established by Democrats when they took over Congress this January, all additional expenditures must be offset by new revenues.

Today the Consumer Federation of America Director of Insurance J. Robert Hunter condemned the bill's cost saying, “This raid on the federal treasury comes at a time when the insurance industry is earning record profits and is refusing to pay legitimate claims to thousands of policyholders damaged by Hurricane Katrina and other storms,”

“There is no justification for increasing taxpayer risk when terrorism insurance is widely available at rates that are dropping and the financial capacity of the insurance industry to handle terror losses is unprecedented,” said Travis Plunkett, CFA's Legislative Director. “By expanding TRIA instead of further cutting it back, H.R. 2761 would foolishly choke off the vigorous growth in the private terror insurance market and reduce the incentive of insurance buyers to take reasonable steps to reduce their terror losses.”

Jimi Grande, vice president for federal and political affairs with the National Association of Mutual Insurance Companies in Washington, said, “While the report deals with numbers and forecasts, the reality is the program won't cost anything until and unless there is another horrific attack on our country.”

In that case, he said, “the concern should not be about dollars and cents, but about saving lives and businesses and getting our country and its economy back on track as quickly as possible.”

Moreover, the cost to the federal government would be less under the legislation than if the government had to cover losses on an emergency basis, he said.

“The legislation also keeps private insurers involved in the process and provides stability to our economy by giving businesses the confidence to continue or begin transactions, which in turn generates taxable income for the federal government,” Mr. Grande added.

That cost would be increased under an amendment due to be offered by Florida Republican Reps. Ginny Brown-Waite and Vern Buchanan.

The amendment, which needs approval for debate, would expand the program to cover homeowners who are unable to obtain affordable homeowner's insurance coverage due to natural disasters.

It would require the program to cover insured losses resulting from natural disasters for states that have established a reinsurance fund.

The amendment defines natural disasters as including earthquakes and perils resulting from earthquakes, such as tsunamis and fire; tropical cyclones having maximum sustained winds of at least 74 miles per hour, such as typhoons and hurricanes; tornadoes; volcanic eruptions; catastrophic windstorms; and any other naturally occurring catastrophe except flood.

The two congressmen said the amendment was appropriate “given the willingness of Congress to come to the aid of major metropolitan residents and businesses unable to get terrorism insurance post-9/11.”

Meanwhile, the Coalition to Insure Against Terrorism has written a letter to each member of the House asking them to support the extension measure. “The bill contains a number of key provisions of importance to American business,” the letter said.

“First, the program's term would be extended to 15 years,” the letter said. “Such an extension affords policyholders with the certainty necessary for long-term projects and allows economic activity to move forward as well.”

This article updated 4:19 p.m.