Why Terrorism Insurance Renewal Was So Difficult

Political resistance to new government programs, a pullback in support from the Bush Administration, even some “blue” versus “red” politics were among the forces that got in the way of timely renewal of the federal terrorism reinsurance program, according to a leading insurance lobbyist in Washington.

Three or four years ago, recalls Leigh Anne Pusey, senior vice president for government affairs for the American Insurance Association, Washington insiders used to joke that President Bush ended every speech with “God Bless America and pass the terrorism bill.”

However in 2005 when it came time to renew TRIA, that full backing of the Bush Administration was missing. Why?

“…(B)ecause they bought this program thinking it was temporary, a three-year program, a bridge…,” says Pusey. When the industry came back and said it needed the government program renewed, conservatives with power in Washington balked.

“We faced the traditional conservative resistance to creating another government program,” Pusey explains.

Congress finally approved an extension of the terrorism reinsurance program known as TRIA (Terrorism Risk Insurance Act) but not before usually friendly Republicans gave insurers and other business lobbyists some sleepless nights. Congress passed the extension on the eve of adjourning for the year and just about two weeks before the existing program was to expire on Dec. 31.

Pusey also said TRIA renewal suffered from a lack of understanding among some lawmakers about how insurance markets work along with the perception among some that TRIA was a “blue” state, or largely Democrat and urban state, program.

Pusey’s insights are part of a two-part video interview with Insurance Journal from AIA’s Washington, D.C. office in which the AIA lobbyist recaps the legislative year just ended and looks ahead to 2006.

In the first part of the interview, Pusey talks not only about why renewal of terrorism reinsurance was such a difficult road, but also about how Congress and the industry responded to the mood set by New York Attorney General Eliot Spitzer’s investigations, and the prospects for asbestos and medical tort reform.

In the second installment, the AIA senior vice president assesses the climate for regulatory modernization on Capitol Hill and in the states and looks ahead to 2006 midterm elections and what they might mean for insurance politics in the coming year.

The complete video interview with Pusey, Window on Washington: Insurance Politics, can be viewed on the Insurance Journal Web site at www.insurancejournal.com.