Legislation extending the Terrorism Risk Insurance Act that specifically covers group life insurance for the first time was overwhelmingly passed by the House on Sept. 19.
H.R. 2761, the "Terrorism Risk Insurance Revision and Extension Act of 2007," extends TRIA for 15 years, until 2022 and also beefs up other areas of the program.
But the bill faces a myriad of problems, including less support for inclusion of group life in the Senate than in the House, and a veto threat from the White House that singles out inclusion of group life as one of the primary concerns of the administration.
Additionally, changes made in a provision that would already prohibit most use of travel destination information in underwriting life policies is raising fresh hackles within the life industry.
At the same time, the bill faces a procedural problem. In an effort to skirt a situation that normally would require a cut in existing programs or new revenues to offset the cost of the program, the House Democratic leadership added a provision requiring a second vote authorizing expenditure of federal funds to reimburse insurers in case of an attack.
Insurers voiced concern about such a provision even though members of the House Democratic leadership said they would work to craft a solution more preferable to the industry that they would propose at a House/Senate conference to reconcile differing bills.
However, in a bulletin to the directors of the Council of Insurance Agents and Brokers sent after the House vote, Joel Wood, senior vice president, government relations, for the CIAB, explained, "In conversations with multiple leading brokers in recent days, we have learned that enactment of such a provision would threaten the viability of the program, as reinsurers, rating agencies and others would take little faith in the pledge of ensuing congressional actions."
With the veto threat from the Bush administration hanging over it, the next step for the bill is the Senate Banking Committee, which has yet to show its hand on the issue despite the fact the current extension of TRIA expires Dec. 31.
In comments after the House action, Sen. Chris Dodd, D-Conn., chairman of the Senate panel, said, "This is a tremendously important issue, and one that should–and must–be a top priority. We must ensure that our nation is financially prepared and protected from the threat of a future terrorist attack."
The administration position, repeated by Republicans during the floor debate, is that TRIA was only intended to be a temporary mechanism to allow the market to adapt "in the short run" to the economic dislocations resulting from the 9/11/2001 attack.
"Therefore, the administration opposes the legislation's 15-year extension," an administration position paper said. "Instead, the program should be phased out in the near future."
It said the House bill runs contrary to that by "unnecessarily" expanding the program by including group life insurance and by adding domestic terrorism coverage.
"The insurance market for these risks has remained robust and competitive since TRIA's inception, even absent a Federal backstop," the administration said. "Adding these insurance coverages to the Federal reinsurance backstop sends the wrong signal to the marketplace, which instead should be encouraged to find new ways to diversify the risks of doing business."
At the same time, the administration gave itself a lot of wiggle room.
