Oxley Supplies ‘Much-Needed Momentum’ for Terror Insurance Extension in Promising Bill by Sept. 29

In what the insurance industry reads as good news, the chairman of the House Financial Services Committee is preparing to send to the full committee a bill to extend the life of the Terrorism Risk Insurance Act (TRIA) for two years.

According to staff on the committee and industry sources, Committee Chairman Michael Oxley (R-Ohio) plans to prepare the bill for a full committee review on Sept. 29.

If Oxley succeeds as expected in unifying his large committee behind one measure, there could be full House consideration even before the House recesses on Oct. 8, according to some observers, although that is by no means certain.

The Oxley measure, which is based on a Republican proposal, will reportedly include a provision for group life to be covered under the act, a concession to Rep. Barney Frank (D-Mass.), minority chairman for the committee, and others that could facilitate quick approval.

Oxley’s decision creates “much-needed momentum” for further action by the full House and then by the Senate, according to Lisa Leigh Ann Pusey. Pusey is senior vice president of government affairs for the American Insurance Association (AIA) in the group’s Washington, D.C. office.

Pusey said the move improves chances for a truly “bipartisan” solution both in the House and the Senate.

AIA along with other insurance and business organizations has been aggressively lobbying for the extension.

The current TRIA, the federal law which provides a national government backstop in case of terrorist attacks, is not set to expire until the end of 2005 and a Treasury Department study examining the merits of renewal is due next June. Insurers, however, are pushing hard to have Congress renew it before then to avoid disrupting the commercial property insurance market.

According to the AIA, the final Oxley proposal will seek to extend TRIA from Dec. 31, 2005 to Dec. 31, 2007 and require insurers to make terrorism insurance coverage available for those years. It is very similar to two bills proposed in the Senate, although there are a few differences.

The Oxley measure retains the insurer deductible at 15 percent in 2006 while phasing out the program with a 20 percent deductible in 2007.

Oxley’s bill also gradually increases insurer retentions, from $15 billion to $17.5 billion in 2006 and $20 billion in 2007. In this feature, the bill is actually harsher on the industry than the Senate version, Pusey noted, so that could become a matter to iron out between the two chambers.

The committee appeared to consider the concerns of some who testified at a recent task force that further extending TRIA would delay the development of a private-market or state-based alternative solution. The bill reportedly will direct the Treasury department to report on long-term solutions for terrorism insurance without a federal backstop.

AIA’s Pusey said that finding a long-term answer is a matter of concern in the Senate and in the industry. She said that her own organization would welcome an even stronger directive for a permanent public-private solution not just a study or report.

Pusey and others in the insurance industry are encouraged by Oxley’s move. The industry’s lobbyists’ highest hope is that both the House and Senate can agree on an extension before the November elections, thereby avoiding the situation of a lame duck Congress having to take up the issue.

For more on the politics of the TRIA extension, see Insurance Journal, Sept. 20 issue.