President Signs TRIADec 27, 2007
President Bush today signed the Terrorism Risk Insurance Act extending the federal backstop on terrorism risk insurance until the end of 2014.
The bill (H.R. 2761 – The Terrorism Risk Insurance Program Reauthorization Act of 2007) extends the current program through 2014 and adds coverage of domestic terrorist events to the program.
The bill, passed by the Senate on Nov. 16, was passed by the House on Dec. 18 after an acrimonious floor debate during which the Democratic leadership of the House railed against the lack of communication that body had with the Senate-and vowed to revisit the issue in 2008.
Specifically, during that debate, Rep. Gary Ackerman, D-N.Y., announced he was introducing legislation designed to increase terrorism risk insurance capacity for properties in urban areas seen as prime terrorism targets where there is currently a shortage of such capacity available, even with the current TRIA program in place, the so-called “reset” provision.
That provision was in the bill passed by the House but eliminated from the Senate version, and will be the subject of House Financial Services Committee hearings next year, according to Rep. Barney Frank, D-Mass., chairman of that committee.
The only other change to the current legislation adds a provision that would mandate that the Government Accountability Office conduct two studies and make recommendations to Congress.
One study would examine the issue of risk posed by attacks from nuclear, biological, chemical and radiation (NBCR) attacks The other study would examine capacity restraints in certain regions of the country such as lower Manhattan.
In the event of a terrorist attack, to comply with budget requirements, the extension mandates that all commercial policyholders have to pay higher annual surcharges than under current law for a medium-sized terrorism event.
The money is recouped through a 3 percent annual surcharge on policyholders up to $27.5 billion. After that, the Treasury Secretary has an option to require repayment.
For a terrorist attack that occurs between January 2008 and December 2011 and requires a surcharge based on the current formula, that surcharge must be paid by the end of the 2012 fiscal year.
Property-casualty insurance associations were universal in praising the bill’s signing.
Joseph Annotti, senior vice president, public affairs, for the Property Casualty Insurers Association of America, said PCI was “pleased” that President Bush has signed the TRIA extension bill into law.
“This seven-year extension brings unprecedented certainty and stability to the terrorism insurance market and keeps in place an extremely successful and important public/private partnership that helps commercial insurance buyers and the entire economy protect themselves from the financial devastation of a future terrorist attack,” he said.
Marc Racicot, president of the American Insurance Association, added that, “Reauthorization of this program was essential to maintaining our nation’s economic security.”
He said that since the bill was first enacted in 2002, “TRIA has been critical to businesses throughout the nation that have relied upon the program for the stability and certainty it provides the private marketplace.”
Carl Parks, senior vice president for government affairs at the National Association of Mutual Insurance Companies, particularly singled out the congressional decision to merely extend the existing program.
“By holding the trigger level to $100 million and keeping co-payments and deductibles at their current levels, Congress has assured that small and medium sized insurers can continue to participate in the program,” he said. “The legislation allows policyholders to obtain affordable coverage in those areas where larger insurers do not provide coverage.”
Ken Crerar, president of the Council of Insurance Agents and Brokers, noted the seven-year extension gives brokers “clarity and certainty” as they negotiate renewals over the coming years.
Robert Rusbuldt, president and chief executive officer of the Independent Insurance Agents and Brokers of America, said, “The continuation of this program was a top priority for our members because it allows terrorism coverage to remain available and affordable and brings certainty to policyholders, insurers, and the insurance market as a whole.”
“This extension strikes an effective balance,” said Jason Spence, IIABA assistant vice president for federal government affairs. “It establishes a long-term extension necessary to foster certainty for policyholders while continuing to encourage increased private market capacity.”
“With the seven-year extension in place and a broader definition of terrorism moving forward, the marketplace no longer faces looming price volatility and coverage uncertainty,” said Greg Case, president and chief executive officer of Chicago-based insurance broker Aon Corp. “To date, the Terrorism Risk Insurance Act has been the basis for creating the market for terrorism risk in the United States. This extension will foster broader affordability and availability of terrorism insurance for property owners, corporations, public entities and insurers. Without this important legislation, private market insurance capacity would be forced to exit the market.”
“Willis is extremely pleased that the federal government has decided to extend the Terrorism Risk Insurance Act with the passage of TRIREA today,” said Joe Plumeri, Chairman and Chief Executive Officer of Willis Group Holdings. “This is a major accomplishment for the long-term health of this nation’s economy.”