House Receives TRIA Extension Proposal

WASHINGTON, DC-The House Financial Services Subcommittee on Capital Markets, Insurance and Government-Sponsored Enterprises, chaired by Rep. Paul Kanjorski (D-PA), held hearings yesterday on the future of the federal government’s role supporting a backstop for terrorism insurance. The extension of the Terrorism Risk Insurance Act, which was first passed in the wake of September 11, is set to expire at the end of this year. With memories still painfully sharp of the last minute scramble to squeeze out an extension, the American Insurance Association and the Coalition to Insure Against Terrorism have presented to Congress a set of principals that it believes must be considered as Congress takes up legislation to renew the federal backstop.

The biggest area of agreement, according to Martin DePoy, coordinator of CIAT’s steering committee, is the mechanisms developed to encourage insurers to cover NBCR (nuclear, biological, chemical) risk. “We have tried to wall off the insurance companies’ liability so they will be able to better model and place the risk,” he tells GlobeSt.com.

According to duel reports issued last year by the USGovernment Accountability Office and the President’s Working Group on Financial Markets the private market has not provided adequate coverage for NBCR attacks outside of workers’ compensation lines.

The solution that AIA and CIAT propose is for new legislation to contain a mandatory “make-available” provision that would require insurers to follow the standard workers’ compensation model. This would be accompanied by an acknowledgement that the federal government is responsible for NBCR terrorism losses above primary insurers’ individual NBCR retention levels. Additionally,TRIEA’s insurer co-pay requirement for NBCR would be eliminated.

Other points the AIA and CIAT would like to see incorporated into new legislation include a program with no expiration date – ending only when Congress determines terrorism is no longer a threat – and the removal of the distinction between foreign and domestic acts of terrorisms, which could conceivable force the Treasury Department to make determinations that might not serve security interests.

To be sure, there is no guarantee these will make it into the legislation – if there is in fact going to be legislation at all. One of the difficulties in getting the original TRIA extended was a cadre of Congress members who did not wish to see the federal government involved in what they deemed to be a private sector matter.

Also, the insurance industry is divided on these approaches, with other representative bodies embracing different ideas. “In our efforts we have tried to be as inclusive as possible with every organization,” says DePoy, who testified in front of the committee. “Going forward, we think we have put together a good proposal that will garner broad industry support.”

He adds that many elements of the CIAT-AIA’s principals, such as the long-term duration of the legislation, already have wide support in Congress.