Insurance Industry Welcomes Terrorism Bill But Not Co-Pay Hike

Insurance industry lobbying groups are hopeful that the bipartisan legislation introduced in the Senate on April 10 to reauthorize the Terrorism Risk Insurance Act, or TRIA, will have a better chance for passage than some of the earlier House attempts.

They remain concerned, however, that some provisions in this latest bill could boost insurer costs and shrink the market. Some are also wary about the debate and legislative negotiations to come.

The new Senate bill includes a seven-year reauthorization of the law last renewed in 2005 and 2007; Congress passed it initially in 2002 in the wake of the Sept. 11 terrorist attacks. TRIA was designed to protect the commercial insurance market, allowing the government to step in, in part, with reimbursement part, after the industry faces more than $100 million in losses after a single terrorist attack. That measure remains in the new proposed legislation, as does a 20 percent insurer deductible.

Unless it is renewed, TRIA would expire on Dec. 31.

By maintaining those two elements, the Senate bill allows small- and medium-sized insurers to keep participating in the program with competitive terrorism insurance coverage, Jimi Grande, senior vice president of federal and political affairs for the National Association of Mutual Insurance Companies, said in a statement. But he and other trade group representatives expressed concern over the Senate bill’s plan to boost each insurer’s co-share from 15 percent to 20 percent.

“The program was designed to soften the economic blow of a catastrophic terrorism attack by providing insurers with a degree of certainty regarding their immediate losses, but the co-payment increase runs counter to that thinking,” Grande said.

Leigh Ann Pusey, president and CEO of the American Insurance Association, agreed, expressing support for the bill in general, but blasting the proposed increase in the insurer co-share. She said in a statement that the co-share increase “could lead to decreased market capacity” and that a final TRIA reauthorization “must protect the balance achieved by the program and not introduce higher retentions on companies that could end up hurting their individual ability to offer insurance coverage to U.S. businesses, including terrorism risk coverage.”

Nat Weinecke, senior vice president of federal government relations at the Property Casualty Insurers Association of America (PCI), said in a statement that the co-share increase, if enacted, “will further undermine economic resiliency” and that “what insurance protection is available for [nuclear, biological, chemical and radiological weapons terrorist attacks] will become increasingly unstable if TRIA’s coverage is narrowed.”

But Wienecke, as with the other association lobbyists, said the Senate bill represents a major, bipartisan step forward. A PCI spokesperson told Carrier Management that the group is also pleased that the Senate and the House (which is mulling a few proposed TRIA extension bills) “are acting well ahead of when they reauthorized TRIA in 2005 and 2007.”

So what comes next?

NAMIC’s Grande said through a spokesperson, via email, that his association expects the “final legislation for extending TRIA to more closely resemble the Senate bill than any current legislation, because it is expected to pass with strong bipartisan support – perhaps as many as 80 votes.”

But Grande also sees room for trouble.

“Leaders of the House Financial Services committee will have a bill of their own out soon, likely just after Congress returns at the end of the month, and they’re probably going to make some substantial changes” he said. “If those changes go too far, it will cost the bill in terms of bipartisan support and make getting it passed more difficult.”

In other words, while the Senate TRIA bill represents real progress, renewal is far from certain yet.