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Insurers and other industry groups are welcoming Thursday's 93-4 Senate vote to extend the federal terrorism insurance backstop for seven years.
The Terrorism Risk Insurance Program Reauthorization Act of 2014 — S. 2244 — would maintain the current trigger for the program, which was created by the Terrorism Risk Insurance Act of 2002, for catastrophic terrorist attacks of all kinds at $100 million. The reauthorization, however, would require insurers to shoulder a greater share of losses from future terrorist attacks.
The bill would also create the National Association of Registered Agents & Brokers, although only for two years after the association begins operation. 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.
The House is expected to take up its own TRIA extension bill soon. The TRIA Reform Act of 2014 — H.R. 4871 — as approved by the House Financial Services Committee in June, would extend the program for five years and gradually raise the minimum trigger for the program to provide coverage after conventional terrorism attacks to $500 million while maintaining the current $100 million trigger for nuclear, biological, chemical and radiological attacks. The House bill would also create NARAB, but with no sunset provision.
The New York-based Risk & Insurance Management Society Inc. greeted the action with a call for Senate and House members to move to craft a final bill.
“With the House and the Senate both in agreement that the need for a reauthorized TRIA bill is a necessity, it's time for the two groups to come together and devise a final version,” said RIMS President Carolyn Snow in a statement. “A common misperception is that TRIA only impacts organizations here in the United States. Any global business that has facilities, employees or components of their supply chain here in the U.S. will be affected should TRIA expire. This is a worldwide insurance issue.”
The Coalition to Insure Against Terrorism, a Washington-based business group, also called for swift House action.
“The Senate's strong bipartisan vote for this legislation underscores the importance of TRIA and the need for reauthorization,” said Marty DePoy, the coalition's steering committee coordinator, in a statement. “We hope the House will move just as quickly, in order to get a final bill for the president's signature well before the end of the year.”
But the chairman of the House Financial Services Committee cautioned against expecting a swift resolution.
“I'm still committed to getting a bill passed, but it has become very clear this week that the process is going to take several more months before there is a resolution,” said Rep. Jeb Hensarling, R-Texas, in a statement.
“We have a diverse Republican caucus in the House. We have some members who believe the reforms go too far, and we also have a host of conservatives who feel the reforms don't go far enough,” he said. “Washington is paying a lot of attention to one group's concerns, but not enough attention to the other's. That's got to change if any TRIA bill is going to pass.”
Insurers in particular hailed the Senate vote.
“Today's vote is an important step toward keeping in place the vital protections for the American economy that the Terrorism Risk Insurance Program provides,” Charles M. Chamness, president and CEO of the Indianapolis-based National Association of Mutual Insurance Companies, said in a statement. “The overwhelming, bipartisan support we've seen for this reauthorization demonstrates how much it has done for our nation and how important it is to our economy.”
“We remain confident that TRIA will be reauthorized in 2014 with strong bipartisan support” after Thursday's vote, Leigh Ann Pusey, president and CEO of the American Insurance Association in Washington, said in a statement.
“This long-term legislation will minimize the disruptions, maintain the availability and affordability of terrorism insurance for consumers and protect taxpayers,” Nat Wienecke, senior vice president of federal government relations in the Property Casualty Insurers Association of America's Washington office, said in a statement. “It is great to see members of both parties come together in a broad bipartisan fashion to support America's economic resiliency plan to recover from terrorist attacks.”
The Alexandria, Virginia-based Independent Insurance Agents & Brokers of America Inc. echoed the underwriter's sentiments.
“Agents and brokers must have the ability to provide terrorism protection to their customers in the event of another unthinkable attack on American soil,” Robert Rusbuldt, the group's president and CEO, said in a statement. “The current TRIA program has worked well to ensure the availability of this coverage, and it is imperative that a lapse be avoided. We thank the Senate for their work to promptly move S. 2244 through the legislative process.”
But the Senate’s action was not met with universal praise,
The Washington-based free market group R Street Institute said the Senate bill did not shift enough risk to the private sector.
“The insurance and reinsurance markets have grown significantly in the dozen years since the Terrorism Risk Insurance Act first was passed, as seen most recently by some reinsurers dropping exclusions for terrorism from standard policies,” R Street Senior Fellow R.J. Lehmann said in a statement. “As private markets for terrorism insurance continue to advance, it is appropriate that the government’s role should retreat to ensure that private capital is not displaced by taxpayer bailouts.”
The U.S. terrorism insurance market continues to be “challenged” by uncertainty over whether the federal government's terrorism insurance backstop will be extended, according to a report issued Wednesday by Guy Carpenter & Co. L.L.C.