House Passes TRIA Extension

WASHINGTON–The House passed legislation today to continue and expand government support for insurers in the event of a terrorism mega-catastrophe for 15 years, setting the stage for a possible confrontation with the Bush administration.

The White House has asked for a bill far narrower in scope and of much shorter duration.

The final vote on H.R. 2761, the “Terrorism Risk Insurance Revision and Extension Act of 2007,” was 312-110.

Besides being extended for 15 years, the bill has been expanded compared to two prior versions to cover acts of domestic terrorism as well as terrorism by foreigners.

It would also cover terrorism acts by nuclear, biological, chemical and radiological means for the first time and reduces the retention rate by insurers for these claims to 5 percent. The current legislation requires a 20 percent retention rate by insurers.

The bill also helps areas that have been victims of prior attacks by adding a reset provision. The provision makes it easier for insurers to underwrite terrorism coverage in areas hit by a previous attack–and charge lower rates than they would otherwise.

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.

It would also add group life to the lines of insurance covered.

While the measure passed by a large margin in the final vote, earlier procedural votes were much closer and along party lines.

For example, a motion to have the bill recommitted to the House Financial Services Committee for reworking failed, 196-228.

And another vote to raise the deductible that insurers must pay to 1 percent per year instead of the .5 percent in the bill failed, 196-228.

The “no” votes came almost exclusively from Republicans who believe the program has been unjustifiably expanded.

The bill also helps areas that have been victims of prior attacks by adding a reset provision.

During the two-hour House floor debate on the legislation, Rep. Carolyn Maloney, D-N.Y., noted the importance of the bill to her home district.

“This is an absolute necessity for New York City, for our economy and for our country… Before TRIA we could not even build a Popsicle stand in lower Manhattan,” she said.

After the vote, Joel Wood, Council of Insurance Agents and Brokers senior vice president for government affairs, told the CIAB board that much work needs to be done before the current TRIA extension expires Dec. 31.

“The bill approved by the House today did, however, hit a speed bump and contains a very significant flaw,” he said.

He noted that it contains a provision to expedite approval by circumventing a House requirement that bills which expand federal spending must be accompanied by an additional revenue source or a program budget cut.

To deal with the “pay-as-you-go” requirement, the legislation as written contains language that would require a second act of Congress to release federal TRIA funds that would ensue from a terrorist incident,” Mr. Wood said.

“Democratic leaders pledged that they intend to seek the removal of this provision in an expected upcoming conference with the Senate,” he added.

So far the Senate has yet to introduce a TRIA measure.