WASHINGTON—Legislation that would extend the Terrorism Risk Insurance Act by two years has been scheduled for a Nov. 16 markup by the House Financial Services Committee.
TRIA, which was enacted on Nov. 26, 2002, created a federal financial backstop that would respond to losses from catastrophic terrorist attacks. The backstop, however, is slated to expire on Dec. 31, despite calls from insurers, risk managers and others to extend it.
The text of the Financial Service Committee's Terrorism Risk Insurance Revision Act of 2005 was not immediately available. Sources familiar with negotiations surrounding the legislation say that the bill would create so-called silos that would segregate individual lines of coverage and subject them to differing deductibles before individual insurers could tap the federal financial backstop created by TRIA. The silos would include workers compensation, property and general liability. Group life, which was not covered in the original version of TRIA, would be added.
The size of the terrorist event would determine the size of insurers' co-pays on a sliding scale that would range from 20% for the smallest covered event to 5% for events causing more than $40 billion in insured damage. During the first year of the extension, an event would have to cause at least $50 million in covered damage to trigger coverage, a size that would double to $100 million in the second year. The backstop provided under the current version of TRIA can be triggered by an event as small as $5 million under some circumstances.
According to sources, the new bill would also eliminate any differentiation between events caused by foreign terrorists, which are now covered by TRIA, and acts of domestic terrorism, which are not.
Insurers would have to pay back any money they received from the backstop by charging a policyholder surcharge that would be capped at 3% per year.
The Bush administration has repeatedly said that it opposes extending TRIA in its current form. Neither Treasury Department officials nor spokespeople for the committee were immediately available for comment on the House proposal because of the federal Veterans Day holiday on Friday.
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