Spitzer, Bloomberg Urge TRIEA Change

The provision is known as the "large event mechanism," or reset, provision.

Specifically, 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 would have the same effect in the event of a future attack in other high-risk areas.

The letter by Gov. Spitzer and Mayor Bloomberg was sent as Congress reconvenes after a two-week Thanksgiving break.

A spokesman for Rep. Barney Frank, D-Mass., chairman of the House FSC and one of the members of the congressional leadership the letter was sent to, said there "is no deal yet" on a Terrorism Risk Insurance Extension Act.

The letter notes that New York has suffered "two severe terrorist attacks."

"The 'Reset' will provide a much-needed incentive for private insurers to make capacity available in those areas where they otherwise would not offer coverage due to the perceived high risk of terrorism," the letter said.

"We cannot stress enough how important this provision is to New York City and New York State," the letter added.

"Without this provision, TRIA will not succeed in accomplishing its core purpose – assuring the availability of sufficient terrorism insurance in all areas, including perceived 'high-risk' areas like New York City, San Francisco and Chicago," the letter added.

"We believe that if it includes the 'Reset', the bill will satisfy the vast majority of interested parties on all sides and attract clear bi-partisan support," the letter continued.

The extension of supports for insurers' major losses in the event of a major terrorism catastrophe is expected to be one of the few things accomplished before Congress takes a break for the holiday season.

The House bill is far more comprehensive than the Senate bill, which merely extends the program for 7 years and adds domestic terrorism to the areas covered by the federal backstop.

Besides the "reset" provision, the House bill extends the program for 15 years, cuts the losses the industry suffers before federal support kicks in, and extends the program to specifically cover nuclear, biological, chemical and radiation attacks. It also adds group life to the program.

But the Senate bill has administration support, and was approved by the Senate by unanimous consent Nov. 16 before it left for its Thanksgiving break.

As noted today by one industry lobbyist, who asked not to be named, the Senate bill has far broader support than the House bill.

"The Senate bill has House Republicans, the administration, Senate Republicans and Senate Democrats onboard — what part don't people understand?" the lobbyist asked.

The reset provision works 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.

Under the provision, insurer deductibles would be reduced by one percent for each $1 billion in aggregate industry losses resulting from an act of terrorism within the previously impacted area, except that deductibles cannot be reduced below 5 percent.

Similarly, the program trigger would be reduced by $10 million for each $1 billion in aggregate industry losses from an act of terrorism in such areas–except that the trigger cannot be reduced below $5 million.