Congress Braces For Showdown Over TRIA

Now that the Senate has passed legislation extending the federal terrorism reinsurance backstop for seven years, the question is whether Rep. Barney Frank, D-Mass., will make good on his threat to push for a four-month extension of the status quo rather than accept a bill that falls far short of his more expansive House measure.

What happens if Rep. Frank, who chairs the House Financial Services Committee, puts his foot down and refuses to be pressured by TRIA's looming Dec. 31 expiration to go along with the Senate's more modest version, but the Senate declines to accept his "bridge bill" to extend debate on a longer-term solution into next spring? Will TRIA be allowed to expire come New Year's Day?

Those were the troubling questions facing lawmakers and industry lobbyists as Congress recessed for the Thanksgiving holiday last week. The Senate returns to work on Dec. 3, while the House is back on Dec. 4.

The stage for confrontation on Capitol Hill was set by the Senate's Nov. 17 vote to extend TRIA through 2014, rather than for 15 years, as the House sought, while leaving out the House mandate for coverage of nuclear, chemical, biological and radiological attacks, among other features.

Indeed, the only substantive change between the Senate bill and the current program is that it extends the program to include domestic terrorism.

For the moment, Rep. Frank is being conciliatory. "I am pleased the Senate passed TRIA," he said in a statement. "We have a month now. We will be back for a couple of weeks in December, and I think it is very important that we begin conversations about a compromise."

"I look forward to a formal conference or otherwise with the Senate, and I will consult very closely with the New York members of our committee who will have a major role in this," he added.

Rep. Frank's mild response was in sharp contrast to the fighting words he voiced last month during a speech in Boston at the annual meeting of the Property Casualty Insurers Association of America.

"My concern is that the Senate will pass a bill that is better than nothing right at the end of the year, and then say the House must take it or leave it, even if we believe it is inadequate," Rep. Frank said at the meeting.

"I will not be subjected to this kind of tactic," he added, explaining that he would propose a "bridge bill" to extend TRIA as is through April 30, 2008, "to allow for further debate and give us plenty of time to do what is best for this country."

Rep. Frank's most recent comment came against the background of a Nov. 16 statement by Rep. Gary Ackerman, D-N.Y., principal author of several provisions of the House bill. Rep. Ackerman said that while he "applauded" the Senate's action, he "insisted" that a final bill "contain the more expansive provisions in the House-passed version."

The key to Senate passage was an agreement by the Congressional Budget Office earlier in the week to accept a proposal from the staff of the Senate Banking Committee that called for policyholders to pay back on an accelerated basis government expenditures made in case of an attack. After that, the CBO agreed to project that the program would have a zero budget cost.

In a note to members, officials of the Council of Insurance Agents and Brokers cautioned that "just as in 2002 and again in 2005, the Senate leaders of the Banking Committee have little to no 'wiggle room' with respect to their negotiated deal to go any further in expanding the scope or the reach of the legislation through concessions to the House."

Martin DePoy, an official with the Coalition to Insure Against Terrorism, which predominately represents large corporations and real estate interests, said the accelerated payback proposal was "acceptable" to policyholders.

"Given the situation we were in as to the budget issue, we accepted this as the best possible solution to the impasse," he said. "We certainly hope that as a result of Senate passage, this extension can expedited on a bipartisan basis."

After the Senate vote under expedited procedures, Sen. Jim DeMint, R-S.C., a fiscal hawk, said, "Hopefully, the House, if they want to get it done, will take what we do and pass it." Sen. DeMint had earlier held the bill for several days because of concerns, he said, that the measure could result in a costly taxpayer bailout if an attack occurred.

Another card the Senate holds is that the Bush administration issued a statement as the bill was being reported out by the Senate Banking Committee in mid-October, saying the White House would "not oppose" the Senate version but would reconsider a veto if more provisions were added to it.

In comments after the vote, Sen. Chris Dodd, D-Conn., who chairs the Senate Banking Committee, said he was "very confident" the House and Senate could reach a compromise before Congress adjourns at the year's end.

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 adds domestic terrorism to the program. The only other change adds a provision mandating that the Government Accountability Office conduct two studies and make recommendations to Congress.

One study would examine the issue of risk posed by NBCR attacks, while the other study would examine capacity restraints 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 NBCR attacks. In addition, the trigger for federal coverage of these attacks would be 5 percent.

Industry and policyholder groups are urging Congress to act promptly to retain the federal backstop on terrorism risk.

A typical reaction was from Marc Racicot, president of the American Insurance Association. "The [Senate] vote was a major step forward to the ultimate goal of reauthorizing the Terrorism Risk Insurance Program," Mr. Racicot said. "We appreciate the priority the Senate has given this vitally important legislation.

However, he added, "the next step is just as critical. It's absolutely necessary that Congress continue their work and reauthorize this program by year's end."

Jimi Grande, vice president of federal and political affairs at the National Association of Mutual Insurance Companies, voiced the same sentiments.

"We applaud the Senate for their vote this morning," Mr. Grande said. "We continue to encourage the two congressional chambers to work together for final passage of this important legislation."

Charles E. Symington Jr., senior vice president for government affairs and federal relations at the Independent Insurance Agents and Brokers of America, said his group "encourages both the House and Senate to reconcile their bills and send this crucial legislation to the president as soon as possible."

David A. Sampson, president and CEO of the Property Casualty Insurers Association of America, said "extending TRIA for a substantial period of time will help provide market certainty for insurance consumers and ensure that we, not the terrorists, will determine where and what to build."

He added, "We now urge leaders on this issue in the House and Senate to move forward expeditiously to produce a unified bill that both houses of Congress can pass and that the president will sign into law before the program expires Dec. 31."

The Risk and Insurance Management Society also issued a statement voicing its "strong support" of the Senate action.

RIMS President Janice Ochenkowski, managing director of global risk management at Jones Lang LaSalle Inc., added that "RIMS will continue to work with members of the U.S. House of Representatives and U.S. Senate as they return from Thanksgiving break and renew efforts to move this bill closer to review by President Bush."