S&P Expects TRIEA Will Pass

WASHINGTON--Congress will pass legislation extending the federal backstop for terrorism with the shorter life span preferred by the Senate over a House version, Standard & Poor's predicts.

The rating service's forecast comes in its 2008 financial outlook for the commercial sector of the property-casualty insurance industry.

The current government support program for terrorism insurance expires Dec. 31, and Congress returns to work Monday. The Senate bill essentially extends the current program for seven years, through 2014. A rival bill in the House would see it continue for 15 years.

Besides the long-term extension of the program, the only difference between the current program, the Terrorism Risk Insurance Extension Act of 2005, and the Senate bill is that the new bill would include coverage for acts of domestic terrorism.

In its 2008 outlook comments S&P said "one factor that could quickly cause us to revise the sector outlook to negative and put downward pressure on ratings would be a failure to renew--or find a suitable replacement for--the Terrorism Risk Insurance Extension Act of 2005 (TRIEA), which is set to expire at the end of this year."

But, S&P said, "we believe that legislation extending this federal backstop will be signed into law by year end."

S&P noted that both the House and Senate have passed bills, and the White House has indicated it supports the Senate version, "so we expect a compromise bill closer to the Senate version."

S&P added that its current ratings take into account the passage of a satisfactory replacement for TRIEA.

"Because we don't believe TRIEA will be an issue, our biggest concern by far is the more competitive commercial lines pricing environment," it said.