House Overwhelmingly Approves TRIA Legislation
|December 6, 2005
By a solid majority of 371-49, the House overwhelmingly approved bipartisan legislation that is a two-year extension and revision of the Terrorism Risk Insurance Act (TRIA). The Terrorism Risk Insurance Revision Act of 2005 is the only legislative proposal pending that would provide for full, mandatory taxpayer reimbursement for federal assistance provided under the program, while significantly raising deductibles and co-shares over current program levels. The legislation narrows the program in anticipation of its phase out.
Capital Markets Subcommittee Chairman Richard H. Baker (LA) said, “Today, with overwhelming support, the House passed a TRIA extension that improves the ability of the government to provide a much needed backstop for both insurers and insured while ensuring full taxpayer recovery of any federal assistance provided through the program. I look forward to a productive and expeditious conference with the Senate.”
On November 16, the Financial Services Committee passed the Terrorism Risk Insurance Revision Act of 2005 by a vote of 64-3. The legislation would: raise the deductibles on all lines of insurance from their current level of 15 percent;
- increase the co-shares for smaller events while decreasing them for an event with insured
losses that are as significant as the World Trade Center bombings or greater;
- significantly increase the amount of insured losses that would trigger the federal backstop;
- require mandatory full payback of federal assistance to make the Treasury whole over
time and provide greater protection for taxpayers;
- requires the development of a federal phase-out proposal;
- and builds long-term capital
to stabilize the marketplace by allowing insurers to treat a portion of their terrorism
premiums as dedicated terrorism capital.
House Financial Services Committee Chairman Michael G. Oxley (OH) said, “The passage of this legislation is an important step in protecting taxpayers and ensuring the continued availability of terrorism insurance. This is strong legislation that requires the insurance industry to pay back all assistance provided by the federal government and promotes the creation of private market solutions. Industry has been slow to respond, so Congress must uphold its duty to the taxpayers by making this program pay for itself.”
Additionally, the legislation would add market reforms to the program to streamline the regulation of terrorism insurance and create a public-private commission to draft specific proposals to establish a long-term pooling terrorism program. Based on the success of the Commission’s recommendation, the program could be extended for a third year as a transition.
Ranking Member Barney Frank (MA) said, “The renewal of Terrorism Risk Insurance Act is very important to future economic development and for demonstrating that America will not allow terrorists to dictate to us. Without TRIA, people who contemplate construction and large-scale development in major cities of this country will be unable to get the financing to go forward or pay unduly high insurance premiums. Developers and contractors would be responsible for insuring against most events, but acts of terrorism are a national responsibility and the costs should be borne by the entire nation.”
The Terrorism Risk Insurance Act of 2002 established a three-year risk-spreading program to back up the insurance marketplace for consumers in the event of a terrorist attack. The law covers most lines of commercial property casualty insurance, including workers’ compensation and business interruption for all U.S. risks. Safeguards ensure that only truly catastrophic events trigger any Federal involvement, while continuing to provide equal protection for small and rural insurers. Without legislation, the program is set to expire December 31, 2005.
Oversight and Investigations Subcommittee Chairwoman Sue W. Kelly (NY) said, “Passage of this TRIA legislation helps create jobs and ensure the availability of terrorism insurance coverage at reasonable costs for small businesses and other properties located in New York and other areas that are at risk for terrorist attacks.”
The Financial Services Committee has held two hearings this year on TRIA with testimony from the Secretary of the Treasury and a number of private sector witnesses.
Source: House Financial Services Committee