Democrats in Congress will seek to extend the Terrorism Risk Insurance Act for as long as five years and expand the program–perhaps even to reinsure natural catastrophes–according to Rep. Barney Frank, D-Mass., the incoming chairman of the House Financial Services Committee.
His party's plan for TRIA constitutes a reversal of current policy under the Republican majority. The GOP–and especially the White House–insisted that the program be narrowed when it was extended last December until Dec. 31, 2007, and said this would be the last extension of the federal reinsurance backstop.
At the same time, industry officials privately cautioned that the House has consistently been more expansive about support for TRIA than has the Senate.
But Sen. Chris Dodd, D-Conn.–who after last month's election said he wants prompt action on a permanent solution to insuring terrorism risk, rather than merely extending the temporary federal backstop, and who played a key role in enactment of the original TRIA in 2002–will chair the Senate Banking Committee next year.
Rep. Frank made his comments at a press session convened to discuss some of his priorities for the House Financial Services Committee next year. “We will expand [TRIA],” he said in response to a question from National Underwriter, citing group life insurance, as well as coverage of nuclear, chemical, biological and radiation risks.
Specifically, he said “his friends” at the Consumer Federation of America “have made a mistake in saying that TRIA is a subsidy to the private sector.
The CFA–especially its director of insurance, J. Robert Hunter–have repeatedly said that TRIA was a bailout of the insurance industry, and that adequate capacity exists to cover terrorism.
“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 didn't 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.
Democrats will also examine whether the TRIA program should be extended to provide a reinsurance backup for catastrophic floods and hurricanes, he said.
Rep. Frank's comments were an expansion of statements he made last week before the Consumer Federation of America that the Democrats will move early enough in the year on TRIA to provide certainty that it will be extended before its Dec. 31 expiration.
Industry reaction was very positive.
“We're encouraged by Rep. Frank's understanding of the issue and his commitment to enacting a long-term terrorism insurance solution,” said Joseph Annotti, senior vice president of public affairs for the Property Casualty Insurers Association of America.
“We look forward to working with Rep. Frank, Sen. Dodd and congressional leaders on both sides of the aisle to ensure that such a solution is fair to all insurers–small, medium and large–and to the millions of American businesses who want to protect themselves from the economic losses of a future terrorist attack,” he added.
“The Big I and our 300,000 agents nationwide are thankful that incoming House Financial Services Committee Chairman Barney Frank is making terrorism insurance a top priority next year,” said Charles Symington, senior vice president of government affairs and federal relations at the Independent Insurance Agents and Brokers of America.
“The ideas he has recently discussed all have merit, and we look forward to working with Congress to hash out the details to make sure that terrorism insurance remains available and affordable for all policyholders,” he said.
“On a separate, but related matter, we also look forward to working with the chairman as he examines natural disaster risk, and the potential need for a national backstop in that area as well,” he added.
“We are encouraged by the comments of soon-to-be Chairman Frank, and look forward to working with him and other congressional leaders to ensure a workable, long-term national terrorism insurance program is enacted as quickly as possible in 2007,” said Dennis Kelly, director of federal media relations for the American Insurance Association.
Rep. Frank also reiterated that Rep. John Dingell, D-Mich.–designated to chair the House Energy and Commerce Committee when Democrats assume control–is unlikely to be given oversight of insurance and securities activities.
That sector was previously one of the Energy and Commerce panel's responsibilities when it was headed by Rep. Dingell before Republicans took control in 1994, and he has been pushing once again to have supervision of financial services.
However, Rep. Frank said, “I believe it is unscrambling an egg, and I don't think it is going to happen.”
He made his comments after the House Democratic Caucus earlier in the day elected him chairman of the financial services panel for the 110th Congress, which takes office Jan. 4. As chairman, he will succeed Rep. Michael Oxley, who is retiring from Congress.
“What the hell can you [the insurance industry] do about someone flying a plane into a building? It is not a result of negligence.”
Rep. Barney Frank, D-Mass.
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