WASHINGTON (Nov. 16, 2005)—The Senate Banking Committee and House Financial Services Committee marked up legislation today to extend the Terrorism Risk Insurance Act (TRIA) for two years. TRIA was enacted into law (PL 107-297) after the September 11 terrorist attacks to provide a federal reinsurance backstop. Its extension is a top federal legislative priority for the National Association of Mutual Insurance Companies (NAMIC).
The Senate Banking Committee reported out S. 467 by voice vote. The House Financial Services Committee approved H.R. 4314, the Terrorism Risk Insurance Act of 2005, by a 64-3 margin.
“NAMIC supports the Terrorism Risk Insurance Extension Act of 2005 as reported by the Senate Banking Committee this morning and urges its swift passage on the Senate floor,” said David A. Winston, NAMIC federal affairs senior vice president. “NAMIC is grateful to Chairman Richard C. Shelby, R-Ala., Ranking Member Paul S. Sarbanes, D-Md., Christopher Dodd, D-Conn., and Robert Bennett, R-Utah, for their considerable efforts to move this critically important legislation in a meaningful way prior to the expiration of the Act at the end of this year.”
In a letter last week to Chairman Shelby and Ranking Member Sarbanes, Winston urged them to support TRIA “with realistic provisions that encourage the maximum private sector participation.” Winston also argued that, “proposals to raise the program’s trigger point for covered events from $5 million to $500 million, and to raise the deductibles from 15 percent to 20 percent in the next two years, would effectively drive out as much as 81 percent of the private insurance market.”
“Without reasonable figures, given the near impossibility of purchasing reinsurance, small companies would be forced to take on an amount of risk that would violate their fiduciary obligation to their policyholders and their responsibilities under state law,” wrote Winston. “A smaller private insurance market, in turn, would further expose the federal government to greater costs in the event of another attack.”
Winston applauded the efforts of the House Financial Services Committee in reporting out the bill this afternoon, “NAMIC appreciates the excellent leadership of Rep. Richard H. Baker, R-La., Capital Markets Subcommittee Chairman, and Committee Members, Geoff Davis, R-Ky., Vito Fossella, R-N.Y., Rick Renzi, R-Ariz., Mike Ferguson, R-N.J., Sue Kelly, R-N.Y., Deborah Pryce, R-Ohio, Pete Sessions, R-Texas, and full committee Chairman Michael G. Oxley, R-Ohio, for their outstanding efforts to move a TRIA extension bill through the House of Representatives.”
In comparing the two bills, Winston points out three key areas, “The Senate bill terminates the TRIA program on Dec. 31, 2007, whereas the House bill contemplates either a pooling mechanism or an extension of TRIA with a scheduled increase in deductibles. The increased event trigger levels are the same: $50 million in 2006 and $100 million in 2007; the House bill expands lines of coverage to include nuclear, biological, chemical, and radiological (NCBR) weapons and group life whereas the Senate bill diminishes TRIA coverage -- most importantly in the area of farm owners multi-peril which will affect our NAMIC farm mutuals; and, the deductibles in the Senate version are lower and across the board as contrasted with the silo approach taken by the House version with different deductibles per line of coverage.”
Under the existing TRIA program, the government would provide reinsurance for 90 percent of losses, to a cap of $100 billion, on events that cause total damage exceeding 15 percent of the entire industry’s prior-year commercial property and casualty direct earned premiums. If a terrorist attack fails to exceed the industrywide retention, the government will provide “temporary liquidity” for events that exceed $5 million in insured damage to those companies with losses that exceed 15 percent of their prior year’s direct earned premiums, and the program requires those companies to repay those funds over time.
“NAMIC is pleased that Congress is making TRIA extension its priority and we are increasingly optimistic that both Houses of Congress will pass TRIA in a meaningful way before the end of the year. So many critical economic decisions depend on the availability of terrorism coverage, making the TRIA extension imperative to avoid marketplace instability,” said Winston.
It is anticipated that the Senate bill will be considered on the floor this week.
For further information, contact
(202) 628-1558 Tel
(202) 628-1601 Fax
Rick Nelson, APR
(317) 875-5250 Tel
(317) 879-8408 Fax
Posted: Wednesday, November 16, 2005 12:00:00 AM. Modified: Wednesday, November 16, 2005 6:14:46 PM.
317.875.5250 - Indianapolis | 202.628.1558 - Washington, D.C.