U.S. House committee votes to extend terrorism insurance plan to end of 2019

A slight majority of the members of a United States House of Representatives committee voted Friday in favour of a bill that, if passed into law, would extend the Terrorism Risk and Insurance Act until the end of 2019 and would increase the program trigger from US$100 million to US$500 million.

TRIA was first made law in 2002, the year after the Sept. 11 hijacking of four civilian airplanes. In essence, it requires insurance carriers to cover losses in incidents which are “certified” by the U.S. government as terrorist acts. It also requires the U.S. government to pay a portion of a carrier’s insured losses that exceed the carrier’s deductible. The maximum available coverage from both the government and industry is US$100 billion.

On Friday, the House of Representatives’ Committee on Financial Services voted 32-27 in favour of the TRIA Reform Act of 2014, H.R. 4871, which was sponsored by Randy Neugebauer, the Republican congressman who represents the 19th district of Texas. That bill would extend TRIA by five years “while strengthening vital taxpayer protections and encouraging more robust private market participation without curtailing the program’s fundamental functions.”

The TRIA Reform Act “phases in a new program trigger” for events other than chemical, radiological, biological and nuclear attacks “from $100 million to $500 million by 2019, which further insulates taxpayers from Program activation,” Neugebauer stated in an earlier release. “It also decreases the federal share of insurers’ losses from 85% to 80% and enhances the Program’s taxpayer repayment requirements.”

If passed into law, the bill would make “no programmatic changes for the first year so the market has time to adjust,” Neugebauer stated. “It clarifies and streamlines the terrorism certification process so policyholders are better protected and it maintains the Program’s current activation and co-pay thresholds for less predictable, catastrophic NBCR events throughout the length of the reauthorization.”

In order to be passed into law, the bill would have to be approved by the majority of House members and sent to the Senate for approval.  After that, a conference comprised of members of both houses of Congress would have to work out any differences between the House and Senate versions of the bill. The final version would require approval by both houses before going President Barack Obama, who has the power to either sign a bill into law veto it.

The Senate is currently considering a different TRIA extension bill. If passed into law, the Terrorism Risk Insurance Program Reauthorization Act of 2014, S.2244, would extend TRIA by seven years. On June 3, the Senate Banking Committee voted unanimously in favour of that bill, which was sponsored by New York Democratic Senator Chuck Shumer.

The approval June 20 of H.R. 4871, by the House Committee on Financial Services, got praise from Risk and Insurance Management Society (RIMS) Inc.

“RIMS greatly appreciates the efforts of the Financial Services Committee, especially with regards to the five-year extension of the program and the streamlined certification process,” RIMS president Carolyn Snow stated in a release. “While RIMS would have preferred a longer extension, the five-year extension will bring a greater degree of certainty to the terrorism insurance process, and the revised certification provisions will enable the government to act more decisively – and quickly – in declaring an occurrence a terrorist event.”

RIMS remains “optimistic that the House and the Senate can agree upon a final TRIA bill before the sun sets on this critical federal backstop,” Snow added.  “While we hope that terrorism insurance is never needed, TRIA’s existence ensures that private organizations have access to affordable insurance and prevents providers from being solely responsible for incomprehensible losses resulting  from a catastrophic terrorist event.”

RIMS says all commercial property, workers’ compensation and auto and general liability insurance lines “should be included” in any new terrorism insurance plan. It should also address “the long-term availability and affordability of insurance coverage for nuclear, biological, chemical, and radiological events caused by terrorism.”