The Republican majority of the committee won't support a simple extension of TRIA, due to expire on Dec. 31, and is instead drafting proposals calling for far less of a federal terrorism reinsurance backstop.

Indeed, the new proposals–to be unveiled this week by the committee staff–while adding group life to the mix of products subject to the federal backstop, will not include coverage of commercial auto and general liability, as suggested by the Bush administration in its guidelines of what would be acceptable, according to industry lobbyists.

Joel Wood, senior vice president and director of government relations for the Council of Insurance Agents and Brokers, was among three lobbyists who said it was their understanding that group life is likely to be included in the draft plan presented to members this week.

"The Group Life Coalition has done an outstanding political job of conveying to members of Congress that if the government decides to provide a backstop for buildings, it should provide a backstop to people as well," Mr. Wood said.

However, in confirming the plan, a lobbyist for a commercial property-casualty insurance company who asked not to be named, added: "It is an absurdity that group life would be included, but that they would scale back the scope of commercial coverage."

A different lobbyist added that "there is no affordability or availability issue with group life–but there is with general liability." Of equal concern, this lobbyist said, is that what he called the "political decision" to add group life and delete some p-c coverages means the basic principle behind the initial TRIA law has "become a victim of political expediency."

"The whole idea was providing seamless coverage on all policies," he explained. "Now, these policies will have to be broken apart."

The leadership of the committee is acting in the face of adamant opposition from House Majority Leader Tom DeLay, R-Texas, and the Bush administration, to a simple extension of the current law to allow additional time to work out a more permanent solution–the course preferred by committee Democrats.

Legislation to essentially preserve the status quo for now already has been introduced in the Senate by Sens. Robert Bennett, R-Utah, and Chris Dodd, D-Conn.

However, because of high-powered resistance to simple extension, staff members at the House Financial Services Committee will outline to lobbyists next week two alternative proposals deemed capable of being supported by the administration and the House Republican leadership, several sources briefed on the plan told National Underwriter.

The committee staff is acting on instructions from Reps. Mike Oxley, R-Ohio, chairman of the committee, and Richard Baker, R-La., chairman of the Capital Markets Subcommittee, the sources said.

One plan would be entirely consistent with proposals from the Treasury Department–it would set higher deductibles, phase out quickly and scale back the scope of the program. The other is a pooling plan that might constitute a more permanent fix.

This first House proposal would extend the current program over two years with far higher deductibles, retention levels and triggers. However, that approach will call for the government to end its backstop after the new program expires Dec. 31, 2007.

One suggestion in this proposal that disappoints insurers calls for a first-year TRIA extension deductible of 20 percent and a second-year deductible of 25 percent. It would also embrace the Treasury proposal for a $500 million event trigger (as opposed to the current event trigger of $5 million) and boost the industry's retention from the current 10 percent to 20 percent.

The second proposal calls for creating industry pools funded by individual companies, perhaps on the basis of net written premiums, with the federal government providing a backstop that would gradually end as the funds in the pools grow.

This program would be based on current laws dealing with reinsurance to provide an incentive for companies to build up reserves.

"The committee staff is operating under a two-track approach, planning to introduce both bills to committee members when they return in September to see which proposal gains the most traction," another industry lobbyist briefed on the proposals said.

Under the pooling program, companies would also have an option to create a second pool that could be used to pay their deductible in case of an attack, a source said.

The latter approach would create a program based on the current TRIA legislation for perhaps a year so the contributions to the pools could provide seed money. This program was first suggested by the Property Casualty Insurers of America in a June white paper.

A third approach suggested by one large insurer that calls for a $25 billion trigger has been rejected by the majority staff of the House Financial Services Committee as politically unrealistic, a source representing a small insurance company said, because it would wipe out many small insurers through even a moderate tragedy.

Infographic, with Capitol Hill shot:

Flag: TRIA At Risk

Head: What Are The Alternatives?

Staff members at the House Financial Services Committee are drafting proposals that would offer insurers a terrorism backstop beyond the Dec. 31 expiration of TRIA, but under much more limited terms and conditions than in the current law. Among the alternatives under development:

o Extending the current program for two years, but with far higher deductibles, retention levels and triggers, and ending the backstop entirely on Dec. 31, 2007.

o Adding group life to the list of covered risks, but leaving out general liability and commercial auto.

o Creating industry pools funded by individual companies, with the federal government providing a backstop that would gradually end as the funds in the pools grow.

o A third suggestion that would set a $25 billion trigger, which opponents say could wipe out many small insurers, has reportedly been rejected.