TRIA Fight About to Get Ugly

Insurers, insureds, agents, brokers, and other stakeholders are meeting to discuss U.S. House draft bill that would phase out TRIA over three years.

Stakeholders seeking reauthorization of the Terrorism Risk Insurance Act (TRIA) are holding an emergency meeting today to discuss next steps in the wake of an alarming draft House bill that would effectively phase out the program over three years.

“It is about to get ugly,” was the way a key industry lobbyist summed up the draft of the Terrorism Risk Insurance Modernization Act (TRIM) proposal.

The meeting will be held at 3 p.m. in the offices of the Chamber of Commerce. Representatives of insurers, insureds, and agents and brokers, as well as such allied industries as mortgage bankers and commercial real estate interests, will be attending, according to industry officials. 

The bill is in sharp contrast to legislation likely to be voted on later this month by the Senate Banking Committee that would reauthorize the program for another seven years based on the current version of the program, which expires Dec. 31. 

Of greatest concern to industry is that reauthorization of TRIA is now caught up in a tug-of-war for control of the House being waged between Republican pragmatists and ideologues. The conservatives have made House leadership support of their severe rollback in government involvement in terrorism risk insurance as a litmus test of conservative support for leadership re-election in the next Congress.

TRIM, as it is being called, is the product of conservative resentment of, among other things, enactment of legislation last month that will roll back actuarial rates imposed on customers of the National Flood Insurance Program mandated through a 2012 law.  

TRIM was crafted by the Republican staff of the House Financial Services at the request of Rep. Jeb Hensarling, R-Texas, chairman of the panel, and Rep Randy Neugebauer, R-Texas, chairman of the Financial Services panel's Housing and Insurance Subcommittee. Neugebauerer is telling industry officials the bill will be introduced within three weeks.

Worse for the industry, they have secured support for their bill from Rep. Eric Cantor, R-Va., House majority leader. It was Cantor whose support was crucial to the enactment of the flood bill. He did so after officials of at least 22 states as well as such political contributors as the housing and real estate industry, said implementation of the 2012 bill would generate a severe downturn in the housing market. 

The TRIM Act, as drafted, would bar any federal coverage for any event—other than that caused by a nuclear, biological, chemical, or radiation attack—of less than $500 million after the initial, three-year phase-in period. Essentially, the program trigger of $100 million per year before federal payments can be made would be retained only for NCBR-certified acts beginning in 2016. For non-NCBR acts, the trigger would rise to $250 million beginning in 2016, rising to $500 million in 2017.

For NBCR certified acts, the TRIM Act retain the federal copayment share of 85% insured losses after the trigger and an insurer’s deductible have been met. For non-NBCR certified acts only, it would decrease the federal copayment share to 80 percent of insured losses beginning in 2016 and decrease the federal copayment share to 75% of insured losses beginning in 2017. 

The bill would also require insurers to deposit 50% of terrorism risk insurance premiums in a special fund that would be administered by the Treasury Department. 

The House bill comes at a time when insurers, insureds, and agents and brokers are warning that continued uncertainty over reauthorization of the program is impacting renewals of all property insurance policies. For example, from the foreign perspective, U.S. insurers and reinsurers need to redouble efforts to explain the importance of renewing the TRIA, according to a London-based managing general agent.  The renewal process for TRIA this time “does feel more uncertain than the last one,” said Julian Barker, senior underwriter at Aqua, a London-based specialty managing general agent, in comments to PC360.

He said it has been 12 years since the original TRIA legislation was passed and seven years since the last renewal. “In that time, the personnel that originally enacted the bill may have moved on, and so it is likely that there needs to be an education process around the original reasoning behind the original bill,” Barker said.  

Originally published on PropertyCasualty360. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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