The legislation is H.R. 4871, the TRIA Reform Act of 2014. It would reauthorize the current version of the Terrorism Risk Insurance Act for five years but would do by setting a path to the end of the program except for nuclear, chemical, biological and radiation (NCBR) risks. It was reported out by the House Financial Services Committee June 20 strictly along party lines.

A unified front

The letter was signed by officials of the National Association of Mutual Insurance Companies, the Property Casualty Insurers Association of America, the U.S. Chamber of Commerce and the Commercial Real Estate Finance Council. It is significant that two key players, the American Insurance Association and the Council of Insurance Agents and Brokers, did not sign on to the letter, nor did important groups representing the commercial real estate and hotel/motel industry.

Officials of the several groups contacted by the National Underwriter said they did not do so because they didn't think taking on the conservative Republican leadership of the House FSC publicly "would be helpful."

The industry and insureds are seeking to persuade the House to accept the Senate bill, which was reported out by the Senate Banking Committee June 3. The industry and insureds are hopeful that Republicans from urban districts could join with Democrats to push through legislation that is more in line with companion legislation reported out June 3 by the Senate Banking Committee.

Controversial House version

The House bill was pushed through by Reps. Jeb Hensarling, chairman of the FSC, and Randy Neugebauer, both R-Texas.

Several industry officials said they believe Hensarling is "open to adjustments" to the bill passed by his committee. One source noted that, 'officials of the Senate Banking Committee is laying down the gauntlet and making clear that they are not keen on conferencing their bill that was supported by Sens. Tom Coburn, R-Okla. and Elizabeth Warren, D-Mass.," who are seen as representing the most conservative and liberal wings, respectfully, of the Senate Banking Committee, with the current House version.

The letter sent by the four trade groups said the current House bill will not address the primary objective of a federal backstop for terrorism risk, which is to "protect consumers by addressing market disruptions and ensure the continued widespread availability and affordability of property and casualty insurance for terrorism risk." It said the primary impact of raising the trigger would be on smaller, regional, and niche insurers whose deductible – and even total exposure – is less than the amount of an elevated trigger level that has been set too high.

Many of the smaller insurance companies and smaller risks are also concerned with the bill's bifurcation of the program into two categories of attack: so-called "conventional" attacks and nuclear, biological, chemical, and radiological attacks. "The source or cause of an attack does little to change an insurer's ability to underwrite terrorism risk and the provision will likely lead to unnecessary confusion in the aftermath of an event," the letter said.

The letter also noted that a significant number of consumers are currently unable to purchase insurance coverage protecting against terrorist attacks without conditional exclusions. This could result in no protection for consumers if Congress does not reauthorize the Terrorism Risk Insurance Act this year," the letter said.

The letter explained that, "as it stands now, the current legislation needs to be revised before it would likely be acceptable to the majority of the House and could be supported by most market stakeholders.

"We urge you to create a process to address these concerns so that the House can pass a bill that will solidify a vital program that has succeeded in fostering a robust terrorism insurance market at virtually no cost to the federal government," the letter concluded.

Differences are significant

The version of TRIA reauthorization bill reported out by the House FSC calls for gradually increasing the program trigger for all non-nuclear, biological, radiological, and/or chemical (NBCR) events, from $100 million to $500 million by 2019, effectively phasing out the program for non-NBCR events after that.

The House bill would extend the current program for five years; the Senate version, S. 2244, the Terrorism Risk Insurance Program Reauthorization Act of 2014, would extend it for seven years. But, the Senate bill does increase industry co-shares by one-third under a 5-year phase-in period.

Hensarling persuaded the Republican caucus on the House FSC to significantly alter the current TRIA program because he believes the bill "is a reasonable set of changes to improve a needed-but-yet-still-temporary program and prepares stakeholders for the future by realistically assessing the true benefits and costs of TRIA's current framework."

But, speaking on behalf of Democrats at the markup, Rep. Carolyn B. Maloney, D-N.Y., a ranking minority member of the committee, voiced a contrary view. "I care deeply about TRIA, and I want to see Congress pass the strongest TRIA bill possible," she said.

But, she said, "I can't support a bill that would, I believe, undermine the whole point of TRIA — to make sure that terrorism insurance is readily available, and affordable, to all American businesses."