Property/casualty producers may start to breathe a sigh of relief in wake of the introduction of a new House terrorism insurance bill that will extend the Terrorism Risk Insurance Act (TRIA) for five years.
Under the proposed legislation, sponsored by Rep. Randy Neugebauer—the vital chairman of the Insurance and Housing Subcommittee—the federal government will continue to provide a backstop program for insurers who do not wish to assume the entirety of terror risk.
It is not the same bill insurers are accustomed to, however. Under this new proposal, the insurer copay will increase to 20% and the program will be divorced from nuclear, biological, chemical or radiological (NBCR) attacks. The federal government will also leave more responsibility to carriers, only stepping in when losses reach the $500 million mark—up from $100 million.
Industry leaders admit to being concerned with these changes, but expressed pleasure that Congress is beginning to make positive strides on the issue. Without a passage by the end of the year, insurers say they will be forced to raise rates on common coverages like workers’ compensation.
The new House Bill differs from a version of a TRIA extension passed earlier in June by the Senate Banking Committee. The Senate’s version, which is awaiting a full body vote, is less stringent in its expectations of insurers.
Under that legislation, TRIA would be extended seven years, instead of five, and keeps the program’s trigger at $100 million.
Consequently, most in the P/C industry prefer the Senate’s bill. Jimi Grande, senior vice president of federal and political affairs for NAMIC, argued that the increase in insurers’ burden for terror isk will drive out smaller carriers.
“The dramatic increase in the trigger is an unacceptable change in the program that will have a punitive impact on smaller, regional and niche insurers and their policyholders,” Grande said. “Increasing the program’s trigger does not accomplish any of the stated objectives of the TRIA program’s critics—namely, it does not reduce taxpayer exposure or shift more of the risk to the private sector.
“Rather, it will serve to either concentrate risk or reduce overall take-up rates as smaller and medium-sized insurers are forced from the program.”
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