Rep. Frank Seeks Way To Clear Budget Hurdle On Vote To Extend TRIA

Rep. Barney Frank, D-Mass., was working last week on a way to clear budgetary speed bumps that caused the House leadership to delay floor action on legislation extending federal support for terrorism insurance.

Under consideration is a provision requiring a separate vote by Congress to authorize payment of claims. That is seen as a way to reconcile expense issues raised by a Sept. 6 Congressional Budget Office letter, warning that extension of the terrorism reinsurance program could cost the government $3.5 billion over five years and $8.4 billion over 10 years–even if there is no attack (or $8.4 billion when direct spending costs are offset by an estimated $2.0 billion rise in governmental revenues from 2008-2017.)

Under House rules instituted by Democrats when they took over procedural control of Congress this year, any program that causes an increase in federal spending must be offset by either new revenues or cuts in existing programs.

The House Democratic leadership is considering the separate-vote idea as it works to get the Terrorism Risk Insurance Act Extension Bill on the House floor this week.

In comments to congressional correspondents confirmed by Steve Adamske, his press aide, Rep. Frank said last week he is “trying to work out” the financial issues that caused the delay. “We hope to have it on the floor as soon as possible,” Mr. Adamske confirmed.

In comments on the House floor on Sept. 7, House Majority Leader Steny Hoyer, D-Md., said the Democratic House leadership would put the bill on the floor the week of Sept. 17, after working through the pay-as-you-go requirement. “Clearly, there is no payout if a terror attack doesn't happen,” he said. “There is a contingency that would have to happen. We're trying to address that.”

“It's clearly of crucial importance to get the budget issue solved and get the bill moving, because the program expires Dec. 31 and the clock is ticking,” said Cliston Brown, federal public affairs director at the Property Casualty Insurers Association of America.

“We're watching very closely to see what final form the chairman's proposed changes will ultimately take, and we will be carefully assessing what impact those changes will have on the program,” Mr. Brown added.

In a letter sent to the Democratic and Republican House leadership, Marc Racicot, president of the American Insurance Association, urged quick action.

“With the current program set to expire at the end of this year, and millions of commercial insurance policies in the process of renewal beyond that date, it is critical that Congress act to continue a program that is a vital part of our nation's economic security in a post-Sept. 11 environment and that has helped to provide much needed market stability for U.S. businesses,” wrote Mr. Racicot.

The bill–H.R. 2761–was originally scheduled for debate on the floor on Sept. 11, the anniversary of the 9/11 attacks that resulted in the insurance industry paying claims estimated at some $36 billion in 2006 dollars (or $37 billion in 2007 dollars).

The first sign that a vote would be postponed was a decision by the House Rules Committee to delay action on a rule that would set the time period for debate and determining which proposed amendments would be ruled in order.

Congressional staffers said the schedule was thrown off by the Sept. 5 death of Rep. Paul Gillmor, R-Ohio, who was a member of the committee.

However, the real reason was the CBO report, Rep. Frank confirmed in comments to Congress Daily. Rep. Frank said he believes he will be able to “work around” the so-called “pay/go” problems and characterized the CBO estimate as “Sanskrit”–in other words, not making practical sense.

Rep. Frank said he was”bewildered” by the CBO estimate (including the revenue offset) because, he argued, if an attack occurred, it probably would cost more than $10 billion–possibly as much as $200 billion. “I don't know how they get a $10 billion terrorist attack…It's letting the process take over the substance,” he said.

He explained that he is considering attaching language to the bill that will say no funds would be spent until after an attack. If an attack occurred, Congress would then have to vote again to release the money. “It would be…'nothing will be spent if this happens.' Then there will have to be another vote to release the funds, which I'm sure would come,” Rep. Frank said.

He added he would have preferred to have secured a waiver of budget rules, but the Democratic House leadership has not granted one this year in the face of anticipated Republican criticism. His published comments were confirmed by his representative.

In the meantime, the CBO report prompted the Consumer Federation of America to condemn the bill's costs.

“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,” said CFA Insurance Director J. Robert Hunter.

“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,” added CFA Legislative Director Travis Plunkett.

“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,” he added.

However, Jimi Grande, vice president for federal and political affairs with the National Association of Mutual Insurance Companies, said that “while the [CBO] 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.

Another potential problem in passing a TRIA extension could be 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 coverage due to natural disaster exposures. It would require the program to cover insured losses resulting from natural catastrophes for states that have established a cat reinsurance fund.

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.”