Senate Passes TRIA Extension Bill

WASHINGTON–The Senate today whisked through without comment legislation extending the federal backstop for insurers' terrorism risk for 7 years, through 2014.

The decision, through a unanimous consent procedure, represents a virtual barebones extension of the current legislation, the Terrorism Risk Extension Act of 2005.

It sets up a confrontation with the House, whose leadership insists that at least some of the provisions of its more expansive legislation be included in the final bill.

But the fact the bill passed before Congress departs for a two-week break means that talks between House and Senate staff to reconcile the different bills can take place before the Senate returns to work Dec. 3 and the House Dec. 4.

That means that, even though Congress has a huge backlog of must-do work to complete before it recesses for the year, it may be able to move promptly. In 2005, final action on an extension did not take place until Dec. 17, the Saturday before Christmas.

In 2005 then House Financial Services Chairman Mike Oxley, R-Ohio, commented dolefully after being presented with the Senate Bill, “There is a time to fold your cards, and the time is now.”

Adding to the coming drama, Rep. Barney, D-Mass., then ranking minority member of the panel added, “There is more democracy in Iraq the last few days, under American leadership, than there is the U.S. Congress under a government where the Republicans control the House, the Senate and the executive branch.”

In comments several weeks ago in Boston, Rep. Frank vowed not to accept the latest Senate fait accompli, saying he was prepared to ask for an extension of the current bill until April 30 so meaningful talks on a compromise can take place.

However, the Senate appears to hold most of the cards, especially since the Bush administration issued a statement as the bill was being reported out by the Senate Banking Committee in mid-October, saying it would “not oppose” the Senate bill, but would consider a veto if more provisions were added to it.

The Senate bill was cleared for floor after budget issues were resolved Monday.

The Congressional Budget Office had projected the Senate bill to cost the government $5.1 billion over its life, and under congressional rules, that cost would have had to be offset by cuts in existing programs or revenue increases.

Under the agreement reached by leaders of the Senate Banking Committee with the CBO, a “fast-forward recoupment” process will be used to guarantee that the U.S. Treasury will be repaid the $5.1 billion estimated cost of the bill over the next 10 years.

The money is recouped through a 3 percent surcharge on policyholders up to $27.5 billion. After that, the Treasury Secretary has an option to require repayment.

The Senate bill continues the trigger for federal involvement for claims stemming from a terrorist attack at $100 million, with insurers paying the first 20 percent of the cost of an attack.

Besides the provision resolving the budget issue, the Senate bill makes only two changes to the current program.

One is a provision that that adds domestic terrorism to the program.

The only other change adds a provision requiring the Government Accountability Office to 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 restraints on the availability of terrorism insurance in certain regions of the country, such as lower Manhattan.

By contrast, the House bill lowers the trigger to $50 million, and adds specific coverage for nuclear, biological, chemical and radiation (NBCR) attacks. And, the trigger for federal coverage of these attacks would be 5 percent.

The House bill also extends the program for 15 years, adds group life to the areas covered, and provides a special break to areas that have already experienced a terrorist risk attack by specifying that insurers cannot use the prior attack as a rationale for higher rates for the program.