Insurance groups sweating bullets over whether Uncle Sam will keep his terrorism reinsurance backstop in place are partying in Washington like it's 1994. That was the last year the Democrats controlled the House of Representatives. And while insurer and agent groups are traditionally associated with Republicans, the fact is that when it comes to TRIA, their most enthusiastic ally is not the GOP, but the Democrats, as developments this week demonstrated.
Indeed, NU Washington Editor Dave Postal reports that Democrats in Congress will seek to extend the Terrorism Risk Insurance Act for as long as five years–and perhaps even expand the program to reinsure natural catastrophes! That's the word from Rep. Barney Frank, D-Mass., the incoming chairman of the House Financial Services Committee.
That certainly is a lot better than what the industry was hearing from the current Republican majority, which treated insurers as if they were trying to bamboozle the federal government into giving them a bailout of an exposure the GOP believes should be entirely carried by the private market.
In case you forgot, it was the Republicans–especially those in the White House–who insisted that the program be narrowed when it was grudgingly extended at the 11th hour until Dec. 31, 2007, and even then only with a stern warning that this would be last extension of the federal reinsurance backstop.
While it's true that the House has always been more open to TRIA extension than their scolding Senate counterparts, keep in mind that with Democrats controlling both houses next year, the dynamic will be quite different in the Senate as well. That's especially true because Chris Dodd, D-Conn., is set to chair the Banking Committee.
A few weeks ago, it was Sen. Dodd–after playing a key role in enacting the original TRIA over a skeptical President Bush in 2002–who called for prompt action on a permanent solution to insuring terrorism risk next year, rather than merely extending the temporary federal backstop.
In addition, as I never tire of reminding this industry, it was Sen. Hillary Clinton, D-N.Y., who insisted last year that extending TRIA's backstop–for the sake of the industry and the general economy–was a matter of national security. This while Republicans insisted that they were the only ones who could be trusted to protect the nation from another terrorist attack, while at the same time telling insurers out of the other side of their mouth to take a hike!
Making this turnabout even more delicious was hearing Rep. Frank, a liberal Democrat, take a shot at those he described as his friends at the Consumer Federation of America, who, he insists, made a mistake in saying that TRIA is a subsidy to the private sector.”
What the hell can you [the insurance industry] do about someone flying a plane into a building? Rep. Frank said. It is not a result of negligence. He also said he didnt want terrorists determining where a building should be built, meaning high insurance costs for terrorism exposures could discourage construction in high-risk, high-profile areas like New York City.
The biggest surprise, however, was hearing that Rep. Frank might consider extending TRIA to provide a reinsurance backup for catastrophic floods and hurricanes. That was certainly music to the ears of those, such as Allstate, backing a national catastrophe fund.
TRIA extension is a sure thing at this point. Could anyone imagine President George W. Bush vetoing anything with the word “terrorism” in it? And all kidding aside, he would have to be crazy to leave the industry–and the economy–prone to another catastrophic strike if terrorists pull another 9/11 on his watch, AFTER he pulled the rug out from under everyone by allowing TRIA to expire.
Anyone think otherwise???
(My thanks to Dave Postal–the best insurance beat reporter in Washington–for providing the reporting for this blog entry.)
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