White House Signals Support For Seven-Year TRIA Extension

With a landslide vote, the Senate Banking Committee approved legislation extending the Terrorism Risk Insurance Act for seven years, drawing a positive message from the Bush administration before the committee votes were even counted.

The staffs of Sen. Chris Dodd, D-Conn., chair of the Senate Banking Committee, and Sen. Richard Shelby, R-Ala., ranking minority member, hammered out the new version last week, and on Wednesday, the committee voted 20-1 to send it to the Senate floor. The only dissenter was Sen. Wayne Allard, R-Colo.

The bill makes only a few changes to the current legislation, which expires Dec. 31. These include the seven-year extension–as compared to the current two-year extension–as well as a provision that adds domestic terrorism to the program.

The only other change to the current legislation adds a provision that would mandate that the Government Accountability Office conduct two studies and make recommendations to Congress. One study would examine the issue of risk posed by attacks from nuclear, biological, chemical and radiation (NBCR) attacks, and the other study would examine capacity restraints in certain regions of the country, such as lower Manhattan.

These changes were designed to take the bite out of a decision to drop two key provisions of companion legislation passed by the House late last month and anticipate pressure by the drafters and supporters of the House bill to demand a conference to resolve differences.

One of the key provisions of the House bill absent from the Senate Banking Committee version adds NBCR coverage to the program, while the other requires issuers of terrorism risk insurance to ignore prior terrorism events in a region.

In testimony before the House Financial Services Committee, the administration had warned of a likely presidential veto if the expansive bill proposed by the House was the final product.

The administration's new position was disclosed in a letter sent by Treasury Secretary Henry Paulson to Sen. Dodd and Sen. Shelby, R-Ala., hours before last week's Senate committee vote took place.

“The administration continues to believe that any TRIA reauthorization should satisfy…three key elements; however, the administration will not oppose the version of the TRIA bill that we understand will be marked up in the Senate Banking Committee,” Secretary Paulson wrote.

In its earlier statements, the administration had established three key elements for an acceptable extension of the Terrorism Risk Insurance Program Reauthorization Act of 2007. These were that the program should be temporary and short-term, that there should be no expansion of the program, and that private sector retentions should be increased.

“Should amendments be adopted that move the current bill farther from our key elements, the president's senior advisers would recommend that he veto the bill,” the letter continued.

Joel Wood, senior vice president, government affairs for the Council of Insurance Agents and Brokers, commenting on what he called “a major move forward to protect the country, added that the bridge of a partisan divide achieved last week “is not only sensible, it is reassuring in a Congress where gridlock has too often prevailed.”

Charles Symington Jr., senior vice president for government affairs and federal relations at the Independent Insurance Agents & Brokers of America, said, “With the terrorism backstop set to expire, this significant step toward extending it on a long-term basis comes at a critical time.”

David Sampson, president and CEO of the Property Casualty Insurers Association of America, said, “We particularly appreciate the exclusion of a mandatory 'make available' requirement for NBCR attacks, and also the inclusion of a seven-year term, which will allow time for a fair analysis of the potential for private sector growth in this market.”

Marliss Browder, senior federal affairs director at the National Association of Mutual Insurance Companies, also sees the elimination of a mandate for insurers offering terrorism coverage to make insurance available for nonconventional weapons is a positive departure from the House bill. This “goes a long way to ensuring greater participation by the nation's medium-sized and smaller insurance companies, thus providing more competition and lower rates for consumers,” she said.

Marc Racicot, president of the American Insurance Association, highlighted the provision for expedited study of the unique insurance challenges posed by NBCR threats, noting that two prior government reports recognized “there is virtually no private insurance market capacity” for NBCR attacks.

Another distinction in the House and Senate bills–the event trigger level for federal involvement set at $100 million in the Senate bill and $50 million in the House bill–is one NAMIC wants revisited.

The lower House bill event trigger “would assure the nation the maximum participation by property-casualty insurers of all sizes,” Ms. Browder said. “We strongly urge Congress to include this provision in the final bill,” she said.

Patricia Borowski, senior vice president for the National Association of Professional Insurance Agents, also advocating the lower trigger said it would “ensure that America's many regional insurance companies–vital to the success of America's insurance industry–will remain in good financial standing should terrorists again strike our homeland.”

NBCR coverage should be restored, she added, noting that a lower deductible for NBCR events is critical, especially for workers' compensation.

Martin DePoy, chairman of the steering committee for the Coalition to Insure Against Terrorism, praised the elimination of any distinction between foreign and domestic terrorism in the Senate bill. “The black-and-white distinction some had believed existed…no longer applies,” he said. “Terrorism is terrorism.”

He said CIAT will work to win support for inclusion of an NBCR provision in a final bill. “Clearly, there is little debate that NBCR insurance is unavailable,” he said.

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