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House committee approves TRIA program extension bill

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Insurance groups are hailing the House Financial Services Committee's approval Friday morning of a bill that would extend the federal government's terrorism insurance backstop for five years.

Some, however, have made it clear they have concerns about the measure as compared to its Senate counterpart.

The program backstop — first created through the Terrorism Risk Insurance Act of 2002 — is slated to expire on Dec. 31. The House extension bill, drafted by Housing and Insurance Subcommittee Chairman Randy Neugebauer, R-Texas, passed the committee on a 32-27 vote.

The Senate's Terrorism Risk Insurance Program Reauthorization Act — S. 2244 — calls for extending the federal terrorism insurance backstop for seven years and won the unanimous approval of the Senate Banking, Housing and Urban Affairs Committee earlier this month. Both bills would require insurers to bear a greater portion of losses from future terrorist attacks.

But the House's TRIA Reform Act of 2014 — H.R. 4871 — also 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 by $100 million per year to $500 million in 2019. Meanwhile, the program trigger for nuclear, biological, chemical and radiological attacks would remain at the current $100 million.

The Senate maintains the current $100 million trigger for all covered terrorist events regardless of their nature.

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 as called for in the Senate bill. Under the House bill, however, the federal share for nuclear, biological, chemical and radiological terrorist attacks would remain at 85% of insured losses.

This bill also seeks to clarify and streamline the terrorism certification process. Beginning on Jan. 1, 2015, in certifying an act of terrorism, the U.S. Treasury secretary would be required to consult with the secretary of the U.S. Department of Homeland Security and the U.S. attorney general and issue a preliminary certification within 15 days of an event. A final determination of whether an event is certified as an act of terrorism would have to come within 90 days.

The bill also would remove the existing $5 million threshold for certifying acts of terrorism.

The Risk & Insurance Management Society Inc. praised the House action.

“While RIMS would have preferred a longer extension, the five-year extension will bring a greater degree of certainty to the terrorism insurance process, and the revised certification provisions will enable the government to act more decisively — and quickly — in declaring an occurrence a terrorist event,” said RIMS President Carolyn Snow in a statement.

“Legislating is the art of the possible, and at this point, both House and Senate committees of jurisdiction have passed changes to TRIA in its current form,” said Nat Wienecke, senior vice president of government relations with the Property Casualty Insurers Association of America, in a statement. “As they continue deliberations, we call on Congress to ensure that any increases to the trigger and coshare not be so high or so steep that they inhibit the availability and affordability of terrorism insurance.”

The American Insurance Association urged the House “to maintain its swift legislative pace on TRIA.”

“TRIA is an effective partnership between private-market insurers and the federal government that provides for an orderly economic recovery in the event of a terrorist attack,” said AIA President and CEO Leigh Ann Pusey in a statement. “The program maximizes private-market risk bearing while protecting taxpayers at every step.”

The National Association of Mutual Insurance Companies praised the vote but expressed some reservations about the bill.

“We are appreciative of the committee's willingness to work with stakeholders to reauthorize a program that is essential for protecting the U.S. economy from the potentially devastating effects of a catastrophic terrorist attack,” said Jimi Grande, NAMIC's senior vice president of federal and political affairs, in a statement. “That said, NAMIC has serious concerns about some of the provisions in the House bill that, if not addressed, could severely curtail some companies' access to the program and significantly disrupt the currently competitive marketplace for terrorism insurance coverage.”

Mr. Grande said in the statement that the proposed increased trigger for non-NBCR attacks was of particular concern.

“It has been suggested that this will further protect taxpayers and maximize private-sector capital in the market for terrorism insurance, however, this is simply not the case,” he said. “The result would be reduced competition and a greater concentration of risk as small- and medium-sized regional or single-state insurers are driven out of the terrorism insurance market.”

In addition, the House bill contains a provision that would create the National Association of Registered Agents & Brokers, or NARAB.

NARAB, which is backed by a broad spectrum of the insurance industry, including the National Association of Insurance Commissioners, would create an independent nonprofit body that would allow for multistate licensing for insurance producers.

NARAB would retain states' regulations within their jurisdictions, and membership would be available to qualified insurance producers.

The inclusion of the NARAB provision drew praise from the Alexandria, Virginia-based Independent Insurance Agents & Brokers of America Inc.

The group is “grateful” that the committee accepted the provisions, said Charles Symington, the agent group's senior vice president of external and government affairs, in a statement.

“H.R. 4871 further demonstrates the House Financial Services Committee's commitment to reauthorizing the TRIA program, as it is critically important to the U.S. economy,” he said.