Flood and TRIA

Renewal by Congress of the Terrorism Risk Insurance Act (TRIA), which faces expiration at the end of this year, should have been a no-brainer. The entire insurance industry urged support for a seven-year reauthorization bill that was ultimately passed in the Senate in July by an overwhelming, bipartisan 93-4 vote.

Given the partisan gridlock that has paralyzed most significant legislation in Congress over the past several years, the vote proved that legislators can still act when something is decidedly in the national interest.

Almost. It is usually in the House where consensus hits a brick wall. For a time, it looked like TRIA renewal would be exempt from this hyper-partisanship. But it was not to be.

No sooner had the Senate acted than House Financial Services Committee Chairman Jeb Hensarling (R-Tex.) threw cold water on any idea that the House would quickly follow suit and take up TRIA reauthorization. Hensarling issued a statement deriding the Senate bill, and that it “is going to take several more months” to reauthorize the program.

Despite the fact that TRIA does not cost the federal government anything unless, God forbid, America suffers a terrorist attack, some House Republicans want to reduce the scope of TRIA and put it on a path to elimination. This is part of a disagreement between those who think that the federal government has a role in helping the business community, especially on matters of national interest, and those who would like to remove the “public” from successful public-private partnerships.

On one insurance issue, a full agreement was reached. Earlier this year, a flood insurance bill passed both the House and the Senate with overwhelming, bipartisan votes. It rolled back some flood insurance rate increases that were mandated in another bill Congress had passed overwhelmingly two years earlier.

Members of Congress had heard from their constituents who faced big rate increases in policies backed by the National Flood Insurance Program (NFIP), some so large that they could have lost their homes. That prompted them to contact their elected representatives and plead for relief.

So the Homeowner Flood Insurance Affordability Act of 2013 (H.R. 3370) was signed into law on March 21, 2014 by President Obama. It repealed portions of the Biggert-Waters Flood Insurance Reform Act (BW-12), passed in 2012.

A major focus of BW-12 had been moving NFIP flood policies to actuarially sound rates—only it did so too fast. “As insurance agents, we have to support risk-based rating,” said PIA National President-elect Richard A. Clements, who also chairs the Flood Insurance Producers National Committee (FIPNC). “But we want to do it on an affordable basis.” He noted that H.R. 3370 mandated an affordability study and also included key provisions on grandfathering and mitigation that PIA supported.

Two other insurance-related bills have cleared one chamber:

The U.S. Senate passed the Insurance Capital Standards Clarification Act (S. 2270), that would modify the Dodd-Frank law to provide the U.S. Federal Reserve with greater flexibility in tailoring capital rules for insurers deemed systemically important financial institutions (SIFIs). The measure corrects the idea that capital rules for banks and insurers should be the same under the 2010 Dodd-Frank law.

In something of a surprise, the National Windstorm Impact Reduction Act Reauthorization of 2013 (H.R. 1786) was approved by the House in July, under a suspension of House rules. Written by Rep. Randy Neugebauer (R-Tex.), chairman of the House Financial Services Housing and Insurance subcommittee, it would establish the National Institute of Standards and Technology for planning and coordinating the National Windstorm Impact Reduction Program.

Effect of Mid-term Elections

What can we expect Congress to accomplish regarding insurance issues between now and the end of the current session? Little or nothing, because we are just weeks away from the midterm elections, with members of Congress focused on their campaigns.

Many other insurance-related bills have been proposed, but few will see any action before the election. These include:

• The Insurance Data Protection Act (not yet introduced), which would rein in the power of the Federal Insurance Office (FIO) to subpoena data from insurance companies. The bill would require the FIO to obtain data through the insurance company's state regulator.
• The Service Members Insurance Relief Act (H.R. 4669) would allow members of the U.S. military to retain their auto insurance policies when they are transferred to new bases.
• Insurance Capital Standards Clarification Act of 2014 (H.R. 4510) would clarify the application of capital requirements to insurance companies that are subject to supervision by the Federal Reserve Board.
• The Insurance Consumer Protection and Solvency Act of 2013 (H.R. 605) clarifies that state insurance laws govern the liquidation or rehabilitation of an insurance company.
• The Risk Retention Modernization Act of 2014 (not yet introduced) would expand the authority of risk retention groups, which are a mechanism for self-insurance, to offer commercial lines of insurance, such as property and auto physical damage.
• The Secure Constructing Code Incentive Act of 2013 (H.R. 1878 and S. 924), would supply extra federal help to states that strengthen their building codes.
• The Catastrophe Financial Savings Account Act (H.R. 3989 and S. 1991), calls for a $5,000 tax deduction for home owners who deposit money into a newly created type of cost savings account to offset catastrophe mitigation expenses.
• The Catastrophe Savings and Resilient Building Act of 2013 (H.R. 2241) would give tax credits for more resilient construction.

Apart from pending legislation, federal agencies are continuing to engage in rule-making. On May 16, the Centers for Medicare and Medicaid Services (CMS), in the Department of Health and Human Services (HHS), issued final rules that would permit unlicensed navigators to perform some of the functions of licensed insurance agents and brokers, while prohibiting the states from requiring that they obtain an agent or broker license.

“These new rules seem to regard efforts to protect consumers from fraud as obstacles to more people signing up for the Affordable Care Act (ACA),” said PIA National Executive Vice President & CEO Mike Becker. “Preventing states from protecting their citizens should never be viewed as a path to success; it is a prescription for failure.”

Most of the insurance proposals pending on Capitol Hill will remain bottled up in the pressure cooker of partisanship that prevents consensus on most legislation. Is there a chance that after the 2014 elections, there will be more agreement? Perhaps—but then again, preparations are already underway for the 2016 elections.