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Terror backstop renewal gains momentum

Terror backstop renewal gains momentum

WASHINGTON--Partisan disagreement over the shape of a continued federal terrorism insurance backstop does not endanger the program, according to proponents of an extended program.

Differences emerged between many Republicans and their Democratic counterparts on the House Financial Services Committee's Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises when the panel approved the Terrorism Risk Insurance Revision and Extension Act last week. The full committee is expected to follow suit this week before Congress leaves for its August recess.

Among other things, the amended version of the original bill would extend the federal terrorism insurance backstop, which is slated to expire Dec. 31, for 10 years. It also would allow the backstop to respond to acts of domestic as well as foreign terrorism; require insurers to offer coverage for nuclear, chemical, biological and radiological attacks; and add group life insurance to the coverages covered by the program (see box, page 32).

Subcommittee chairman Paul Kanjorski, D-Pa., who offered the amended bill, also called for adding one representative each from the workers compensation insurance industry and the commercial real estate industry to a commission on terrorism risk insurance. The panel would make recommendations concerning the marketplace within five years of TRIREA's enactment and would issue a report eight years after the bill became law.

The subcommittee also approved an amendment offered by Rep. Richard Baker, R-La., that would allow the backstop to respond to an event causing as little as $5 million in damage under some circumstances.

Republican members of the subcommittee made several unsuccessful attempts to scale back the program during last week's mark-up. An effort to extend the program by only two years failed, as did one to extend it for five with an optional additional two-year extension. The panel also rejected an attempt to extend the backstop for six years for conventional terrorist attacks and 15 years for NCBR attacks. An effort to require full recoupment of any federal funds paid from the backstop also fell short. Ultimately, only a handful of Republicans voted for the bill in the subcommittee.

The Risk & Insurance Management Society Inc. liked what emerged from the mark-up.

"The TRIA bill is everything we wanted pretty much," said Terry Fleming, a RIMS board member.

"There are still some questions from insurers on the NCBR piece, but I thought that the (amended bill) was not bad idea," said Mr. Fleming, who is also director-division of risk management for Montgomery County, Md., in Rockville.

"We're most encouraged by the subcommittee getting the bill moving and the consideration that was given to concerns of small and midsize companies, especially with regard" to NCBR, said Carl Parks, Washington-based senior vp for the National Assn. of Mutual Insurance Cos. "We'll continue to work with the committee in trying to address our concerns about NCBR." NAMIC opposes the mandatory NCBR cover.

"I don't think there's really partisanship," said Mr. Parks. He said NAMIC was concerned, though, that an eventual Senate bill could contain "amendments that might not be directly related to TRIA."

Still, "I think there's strong bipartisan support for the program," he said, adding that the Treasury Department appears "more open to the program than any time in the years I've dealt with this."

"I think there are genuine concerns on the part of many of the Republicans that the program's gotten too rich," said Joel Wood, senior vp with the Council of Insurance Agents & Brokers in Washington. "On the other hand, I very much appreciate what Chairman (Barney) Frank (D-Mass.) and Chairman Kanjorski are doing to position this bill for final enactment."

"They've raised the bar high," he said. "I think there's every expectation that this will be the high water mark for TRIA. It's good timing. I think it will help set the stage for a Senate resolution. But I also think the Senate Banking Committee works by consensus, and that a consensus bill is going to be scaled back. To the extent that the House bill raises the bar, that raises the bar for everyone."

The panel's action is "very significant," said Leigh Ann Pusey, chief operating officer of the American Insurance Assn. in Washington. "It's positive that the committee is moving forward. TRIA has always enjoyed bipartisan support and we are hopeful that we will continue to keep bipartisan support in the end."

"The committee has really worked hard to come up with a good bill," said Ben McKay, senior vp of the Property Casualty Insurers Assn. of America in Washington.

"The bill definitely has its pluses and minuses. We certainly like the reduced trigger--we think that is crucial to adding competition to the marketplace," Mr. McKay said. "We're very positive on the trigger and we're also very positive on the reduced deductibles for NCBR."

Regarding the politics of the debate, he said "the dividing line is not necessarily straight down the middle. It's down the middle, crossways and perpendicular, depending on the issue you're taking about."


The Terrorism Risk Insurance Revision and Extension Act, as approved by the House Financial Services Committee's Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, would:

  • Extend backstop through 2017.

  • Require insurers to offer coverage for nuclear, biological, chemical and radiological acts of terrorism beginning in 2009.

  • Reduce insurers' deductibles charged under the program for NCBR coverage to 3.5% and increase by 0.5% per year until reaching 7.5% in year 10 of the program.

  • Include group life insurance under covered lines.

  • Allow the backstop to respond to acts of domestic, as well as foreign-initiated acts of terrorism.

  • Reduce the loss required to trigger the backstop to $5 million under some circumstances.

  • Create a commission on terrorism risk insurance that would issue periodic recommendations on the state of the terrorism insurance marketplace.

    Source: Terrorism Risk Insurance Revision and Extension Act, as amended.