The Senate Banking, Housing and Urban Affairs Committee has unanimously approved a measure that would extend the federal terrorism insurance backstop by seven years.
In his opening statement before Tuesday's vote, Banking Committee Chairman Tim Johnson, D-S.D., noted that Congress first passed the original Terrorism Risk Insurance Act of 2002 “in response to the insurance industry no longer offering coverage for the commercial property market following the tragic Sept. 11 terrorist attacks. Today, the private insurance industry has returned to the marketplace and is able to serve this vital market because of TRIA, not in spite of it.”
In addition to reauthorizing the program, which is slated to expire Dec. 31, for seven years, the Terrorism Risk Insurance Reauthorization Act of 2014 — S. 2244 — calls for two major changes to the program.
Under current law, in the event of a terrorist attack, insurers would first pay 20% of the prior year's direct earned premium for covered commercial lines as a deductible. After that deductible, the federal government covers 85% of each insurer's losses until losses total $100 billion, leaving individual insurers to cover the remaining 15%.
The Senate measure would increase insurers' copay after the deductible to 20% from 15%, with the government covering 80% of each insurer's additional losses. The deductible increase would be phased in incrementally over five years.
The measure passed on a 22-0 vote with only a package of noncontroversial technical amendments offered by the panel's leadership approved. The measure now goes to the full Senate.
“This seven-year extension of TRIA will continue to help promote economic growth and provide certainty for commercial property development and job creation across the country while protecting the taxpayer,” said Sen. Johnson in a statement issued after the vote. “With such a substantial bipartisan vote out of the Banking Committee, I thank my colleagues on both sides of the aisle and plan to continue working with them to move the bill through the Senate in a timely manner.”
“The Banking Committee worked to develop a program that will help limit the economic damage of any future terrorist attack, make our economy more resilient, and increase taxpayer protection,” said Sen. Michael Crapo, R-Idaho, the committee's top Republican, in the statement.
Three bills that would reauthorize the program for various lengths of time and with different changes to program, but none has come to a committee vote. The chairman of the House Financial Services Committee's Housing and Insurance Subcommittee — Rep. Randy Neugebauer, R-Texas — is expected to introduce a reauthorization bill soon.