Insurance industry prefers Senate version of TRIA reauthorization billsReprints
Differences between House and Senate bills that would reauthorize the federal government's terrorism insurance backstop appear to be resolvable before the program expires Dec. 31.
While industry experts say the legislative differences are significant, they are not insurmountable even for this sharply divided Congress.
One of the biggest issues is the duration of the extension. The TRIA Reform Act of 2014, approved by a 32-27 vote Friday by the House Financial Services Committee, would reauthorize the program for five years.
The Terrorism Risk Insurance Program Reauthorization Act the Senate, Banking, Housing and Urban Affairs Committee unanimously passed earlier this month would extend the program for seven years.
Both bills, now headed to the floor of the respective chambers although no date has been set for consideration, would retain the current program for 2015.
Also, both would require insurers to bear a greater portion of losses from future terrorist attacks.
Insurers' “clear preference is a bill closer to the Senate bill,” said Peter Lefkin, senior vice president of government and external affairs for Allianz of America in Washington. “I think ultimately any bill that is enacted would be closer to the Senate bill and will accommodate at least some of the House concerns.''
Meanwhile, a stark contrast between the measures is the House bill differentiates between conventional terrorist attacks and nuclear, biological, chemical or radiological attacks. Beginning Jan. 1, 2016, the trigger for tapping the program following conventional attacks would increase $100 million per year up to $500 million. Meanwhile, the trigger for nuclear, biological, chemical and radiological attacks would remain at the current $100 million. The Senate bill makes no change to the trigger regardless of the nature of the terrorist attack.
Also starting Jan. 1, 2016, the House legislation would reduce the federal share of payments for losses from conventional terrorist attacks to 80% of insured losses by 2019, the same percentage included in the Senate bill. Under the House bill, though, the federal share for nuclear, biological, chemical and radiological terrorist attacks would remain at 85% of insured losses.
The House bill also seeks to clarify and streamline the terrorism certification process. Beginning on Jan. 1, 2015, the U.S. Treasury secretary would be required to consult with the secretary of Homeland Security and the U.S. attorney general and issue a preliminary terrorism certification within 15 days of an event. A final determination would be made within 90 days. The bill also would remove the existing $5 million threshold for certifying acts of terrorism.
Joel Wood, senior vice president of government affairs at the Washington-based Council of Insurance Agents and Brokers, said the House bill was “much improved” from earlier discussion drafts of the measure. “We hope the House acts on it very soon. There are a lot of sensitivities in the differences between the House and Senate bills, but we don't think they're irreconcilable.”
Industry experts expect Congress to succeed in negotiating a legislative compromise before the program expires at year-end. Since the program was established under the Terrorism Risk Insurance Act of 2002 as a result of the Sept. 11, 2001, terrorist attacks, Congress already has extended it twice.
With the bills, “the key difference is the number of years,” said Thomas J. Santos, vice president of federal affairs at the American Insurance Association in Washington. “The trigger issue will be an issue that needs to be negotiated. The bifurcation issue will be something that has to be worked on” plus a few smaller issues.
“At the beginning of this Congress, there were questions whether TRIA would be taken up at all” by the House Financial Services Committee, said Nat Wienecke, senior vice president of federal government relations at the Property Casualty Insurers Association of America in Washington. It would have been easy for opponents to stop last week's House markup of the bill, but they decided to move the process forward and “I think that's very important.”
“What bodes well for TRIA is there are primarily five issues and the important thing is they're easily understood,'' he said, noting the program trigger, the duration, differences in recoupment and the bifurcation issue.
“I suspect they could hammer out a deal in a couple of days because the differences between the two bills aren't too hard to understand,” Mr. Wienecke said.
Jimi Grande, senior vice president of federal and political affairs at the National Association of Mutual Insurance Co.'s Washington office, said, “I think there's going to be renewal and there appears to be much greater consensus around the Senate bill.
“If you put the Senate bill on the House floor tomorrow, you'd get more than 300 votes, whereas the House bill still needs a lot of improvement so it doesn't create new burdens for taxpayers through less availability and higher prices,” Mr. Grande said.
Senior Editor Rodd Zolkos In Chicago contributed to this report.