House Vows To Seek TRIA Expansion As President Signs Seven-Year Extension

The House intends to pursue a broader program despite opposition by the White House and many Republicans in Congress.

For a start, Rep. Gary Ackerman, D-N.Y., announced he was introducing legislation designed to increase terrorism risk insurance capacity for properties in urban areas seen as prime terrorism targets, where there is currently a shortage of such capacity available, even with the current TRIA program in place–the so-called "reset" provision.

That provision was in the bill passed by the House but eliminated from the Senate version, and will be the subject of House Financial Services Committee hearings this year, according to Rep. Barney Frank, D-Mass., who chairs the panel.

The only other change to the current law adds a provision that orders the Government Accountability Office to conduct two studies and make recommendations to Congress: One would examine the risks posed by attacks from NBCR attacks, while the other would examine capacity restraints in vulnerable regions, such as Manhattan.

There will be a period of transition under the extension, noted the Council Of Insurance Agents and Brokers in a note to members.

Citing an interim guidance on the new TRIA extension issued by the Treasury Department, CIAB said "the expanded mandatory 'make available' requirements that now encompass both 'foreign' and 'domestic' acts of terrorism apply to all commercial property and casualty policies covered by the program that start or are renewed after Dec. 26, 2007."

"The Department recognizes, however, that insurers may not be able to comply with the requirements immediately," noted CIAB, "and the guidance therefore provides that insurers will have until March 31, 2008, to bring all of their offers into compliance for policies with initiation dates after Dec. 26, 2007."

For policies in effect prior to Dec. 26 with terms ending after Jan. 1, 2008, "the guidelines stipulate that insurers are not required to offer the expanded coverage for 'domestic' acts of terrorism," CIAB added.

To comply with budget requirements, under terms of the extension, in the event of a terrorist attack all commercial policyholders will have to pay higher annual surcharges than under the prior law for a medium-sized terrorism event. The money is recouped through a 3 percent annual surcharge on policyholders up to $27.5 billion. After that, the secretary of the Treasury has an option to require repayment.

For a terrorist attack that occurs between January 2008 and December 2011, and which requires a surcharge based on the current formula, that surcharge must be paid by the end of the 2012 fiscal year.

Property-casualty insurance associations were universal in praising the extension.

"This seven-year extension brings unprecedented certainty and stability to the terrorism insurance market," said Joseph Annotti, senior vice president of public affairs at the Property Casualty Insurers Association of America.

He added that the extension "keeps in place an extremely successful and important public/private partnership that helps commercial insurance buyers and the entire economy protect themselves from the financial devastation of a future terrorist attack."

Marc Racicot, president of the American Insurance Association, added that "reauthorization of this program was essential to maintaining our nation's economic security." He said that since the bill was first enacted in 2002, "TRIA has been critical to businesses throughout the nation that have relied upon the program for the stability and certainty it provides the private marketplace."

Carl Parks, senior vice president for government affairs at the National Association of Mutual Insurance Companies, particularly singled out the congressional decision to pretty much merely extend the existing program.

"By holding the trigger level to $100 million and keeping co-payments and deductibles at their current levels, Congress has assured that small and medium-sized insurers can continue to participate in the program," he said. "The legislation allows policyholders to obtain affordable coverage in those areas where larger insurers do not provide coverage."

CIAB President Ken Crerar said the seven-year extension gives brokers "clarity and certainty" as they negotiate renewals over the coming years.

Robert Rusbuldt, president and CEO of the Independent Insurance Agents and Brokers of America, said "the continuation of this program was a top priority for our members because it allows terrorism coverage to remain available and affordable and brings certainty to policyholders, insurers and the insurance market as a whole."

"This extension strikes an effective balance," added Jason Spence, IIABA assistant vice president for federal government affairs. "It establishes a long-term extension necessary to foster certainty for policyholders while continuing to encourage increased private market capacity."

"With the seven-year extension in place and a broader definition of terrorism moving forward, the marketplace no longer faces looming price volatility and coverage uncertainty," said Greg Case, president and CEO of Aon Corp.

Noting that TRIA "has been the basis for creating the market for terrorism risk in the United States," Mr. Case said "this extension will foster broader affordability and availability of terrorism insurance for property owners, corporations, public entities and insurers. Without this important legislation, private market insurance capacity would be forced to exit the market."