AIA Fighting New TRIA Bill Changes

WASHINGTON–The American Insurance Association is raising strong objections to language inserted by the House Democratic leadership in legislation extending federal supports to insurers for terrorism losses.

H.R. 2761, the “Terrorism Risk Insurance Revision and Extension Act of 2007″ (TRIREA), was approved today by the House.

But no similar legislation has been introduced in the Senate, and the Bush administration has threatened a veto of the bill in its present form.

One of the reasons the administration said it would recommend a veto of the legislation if it is sent to President Bush in its present form is failure to deal appropriately with the House rule that requires new revenues or program cuts somewhere to balance the cost of programs increasing federal spending.

The Congressional Budget Office has put the cost at $8.4 billion over 10 years.

In a letter obtained by National Underwriter, Marc Racicot, AIA president, wrote the House leadership yesterday that “the industry has serious reservations about the commercial workability and certainty of the provision and the potential adverse marketplace impact.”

He added, “As the legislation moves forward in the process, we look forward to working with you and others in Congress to ensure these concerns are resolved in a way that preserves the future viability of the program.”

Under the “fix” passed by the Rules Committee yesterday, the TRIA extension legislation was amended to add a provision requiring passage of a joint resolution by Congress before money could be spent by the federal government to reimburse insurers for losses from a covered terrorism attack.

The provision approved by the Rules Committee calls for a vote on the resolution after certification by the secretary of Treasury, in concurrence with thesecretaries of State and Homeland Security and the attorney general, that there has been an act of terrorism. The rule would be considered by Congress under fast-track procedures, under the amendment.

Industry lobbyists said the letter was written because AIA officials failed to persuade the House leadership to adopt another approach to deal with the pay-as-you-go issue. The AIA supported language that would grant an outright waiver from “pay-go” rules for the legislation.

Its argument, according to industry lobbyists who declined to be quoted, was that credit agencies were unlikely to believe the reauthorization approach would satisfy credit agencies' demand for certainty that insurers would be reimbursed for claims paid under the program resulting from a terrorist attack.

House Majority Leader Steny Hoyer, D-Md., has “pledged” to the AIA and other lobby groups “that the House will support removal of this requirement in any ensuing conference with the Senate,” according to one industry representative.

In a letter to the Council of Insurance Agents and Brokers board, Joel Wood, its chief lobbyist, said in explaining the House leadership's decision to delay action yesterday that the reauthorization proposal “has caused heartburn for the industry, as clients need certainty when securing coverage.”

He added, “The practical side of me, however, believes that it is unimaginable that Congress would fail to release TRIA reinsurance funds in the event of a catastrophe, as the alternative for the federal government would be much worse.”

In comments today made as the House debated the issue, Mr. Wood said, “It's not a good solution, but it is a politically expedient one for the moment, and we're grateful for the leadership's commitment to getting to the finish line with a clean, good bill.”