TRIA Compromise Likely Before End-of-Year Expiration

Although there are substantial differences in House and Senate versions of legislation to renew the Terrorism Risk Insurance Program, industry observers widely expect a workable compromise before the $100 million backstop expires on Dec. 31.  
  
The Senate passed a seven-year extension by unanimous consent on Nov. 16, which differered from he House’s 15-year version passed in September. The federal backstop, established in 2002 by the Terrorism Risk Insurance Act, is a top priority for the property/casualty industry. The law requires insurers to offer terrorism coverage to their commercial property, business interruption, workers' compensation and directors and officers policyholders, who may elect whether to purchase it.  
  
“This is a must-do piece of legislation. There’s already uncertainty in the marketplace,” said Marliss Browder, senior federal affairs director for the National Association of Mutual Insurance Companies.  
  
“Pre-Conferenced” Compromise  
  
The White House has threatened a veto of the House version, objecting to the length and various expansions of the backstop, including a lowering of the trigger level to $50 million from the current – and Senate-passed -- $100 million. House Financial Services Committee Chairman Barney Frank, D-Mass., has stood behind his chamber’s version, but has made comments aimed at compromise since the Senate passage.  
  
Ben McKay, senior vice president of federal government relations for the Property Casualty Insurers Association of America, said the Senate bill is almost a “pre-conferenced” version, as it includes major priorities of Frank, his Senate colleagues and the industry.  
  
“The senate bill is a subset of everything Frank wanted,” he said. “By getting so much, Frank gave [Senate Banking, Housing and Urban Affairs Committee Chairman Chris] Dodd room to maneuver.”  
  
The House bill mandates insurers offer coverage for nuclear, biological, chemical and radiological attacks; the Senate bill does not. Such a mandate is a no-go for most insurers, who find it unrealistic.  
  
“That is something our membership is completely opposed to. How do you offer coverage for something that is an uninsurable risk?” Browder asked.  
  
From a budgetary standpoint, NBCR would add approximately $1 billion a year to the cost, McKay said.  
  
The nonpartisan Congressional Budget Office estimates the Senate bill would cost $3.1 billion over the next five years and $5.1 billion over the next 10 years, lower than the $8.4 billion score CBO gave to a version passed in September by the House. To "patch" the budget hole, Senate leaders agreed early the week of Nov. 12 to accelerate the repayment window for the industry's $27.5 billion in mandatory recoupment to the federal Treasury. The House-passed bill looked to comply with pay-as-you-go budget rules by requiring Congress to take a separate vote to authorize the release of funds following any future terrorist event.  
  
Both the Senate and House versions would end the current distinction between foreign and domestic terrorist actors. Only the House bill calls for extending the backstop to cover group life risks.  
  
McKay called the group life provision a potential “deal breaker” due to its complications.  
  
Frank Keating, president and chief executive officer of the American Council of Life Insurers has called its exclusion the “neutron bomb theory of public policy” – taking care of property, not people.  
  
The differences in trigger provisions and in length are more conducive to compromise, McKay said.