An executive with the Property Casualty Insurers Association of America said Congressional leaders have offered assurances that they’ll reauthorize a version of the Terrorism Risk Insurance Act, or TRIA, likely in the first-half of December.
“We have had lengthy discussions with the top leadership in both the House and the Senate, and they assured us that TRIA will be re-authorized,” Robert Gordon, PCI’s senior vice president of policy development and research, told Carrier Management during the PCI Annual Meeting in Scottsdale, AZ.
His comments during an Oct. 27 interview echo similar remarks from at least one other industry association. In September, Jimi Grande, senior vice president for federal and political affairs at the National Association of Mutual Insurance Companies, told Carrier Management that he also expected last-minute renewal of TRIA before it expires on Dec. 31, 2014. Congress first passed the federal terrorism reinsurance program after the 9.11 terrorist attacks in a bid to keep terrorism risk insurance affordable and stabilize the economy and has reauthorized the program several times since then.
At the same time, not every industry lobbyist is publicly optimistic about timely TRIA renewal.
“At the very least take nothing for granted,” former U.S. Sen. Ben Nelson, CEO of the National Association of Insurance Commissioners, said on Oct. 29 during a speech at the PCI meeting. He questioned whether Congress would actually approve TRIA in the post-election lame duck session and said his organization continues to lobby hard for TRIA’s renewal.
“We must urge Congress to move fast,” Nelson said. “Many of our commissioners have reached out to congressional delegations to reaffirm that, what to us, is obvious: Without TRIA, terrorism insurance ceases to exist and markets that remain, such as workers compensation, will be dramatically impacted.”
Both Nelson and Gordon said that the House and Senate are still working to resolve some remaining disagreements about what a new TRIA reauthorization would look like. Earlier this year, the Senate approved a renewal bill widely supported by the insurance industry and many business groups and it would maintain the current version of TRIA.
House Republicans haven’t passed their own bill yet, but their proposed TRIA reauthorization would, in part, increase the reinsurance trigger from $100 million to $500 million over a five-year period. This is something the industry and businesses have opposed because it would “price a significant number of small insurance companies out of the marketplace” and create some issues concerning availability and affordability of coverage, Gordon said.
“What is a little different this time is that there are some members of Congress who are very determined to impose reforms on the program,” Gordon said. “As a taxpayer, I always want to see Congress reevaluate programs every time they come up for reauthorization to see if there are potential improvements. But, I think this time the political dysfunction in Congress is really taking this out until the very last second.”
The idea of a six-month renewal is another potential stumbling block that could delay a final TRIA resolution. Some Republicans in the House have submitted the idea of a short-term renewal of TRIA until Congress can finalize long-term reforms. Both Gordon and Nelson said that this approach won’t fly with the insurance industry.
“There’s been a threat of ‘we can’t get our way, we’re going to put a six-month extension on the floor, and that’s all you get,'” Gordon said, but he asserted this won’t be viable with insurers who typically renew policies for a full calendar year.
“The thought of having all of these insurance policies, for example, those done on a calendar year basis, and then having TRIA suddenly stop halfway through” raises issues, Gordon said. “Then the question [becomes] do you have to provide refunds for the terrorism premiums you collected, or do you have to renegotiate those policies?”
Gordon said most in Congress appear to to recognize that a short-term extension “would be a disastrous approach.”
Nelson offered similar sentiments during his PCI speech.
“We, as you, prefer long-term reauthorization” of TRIA, Nelson said.
Not having TRIA adds uncertainty to insurance contract renewal discussions now underway. But SwissRe US President Bill Donnell said in a Carrier Management interview at PCI that the negotiations are proceeding with the general assumption among clients that TRIA will be renewed.