Some insurance companies are complaining that Sen. Richard Shelby, R-Ala., is stalling the renewal of the Terrorism Risk Insurance Act (TRIA) that protects insurers against major financial losses in the event of another terrorist attack.
Shelby, the Banking Committee chairman, contends he isn’t necessarily against the renewal of the landmark government guarantee approved by Congress in 2002, but he wants to investigate it further and review a Treasury Department study due next summer.
The House could act on a short-term extension of the bill before the end of the year, but Shelby’s insistence on additional hearings appears makes it doubtful the Senate will pass it before next year.
Many in the insurance industry say that’s far too late. Even though the current protection lasts through the end of 2005, policies are already being written for 2006 and beyond. The lack of any government guarantee beyond that drives up the premium costs for policy holders, they say.
But Shelby spokesman Andrew Gray said the process and timing should come as no surprise to insurance companies because it was included in the previous legislation.
“I think we still have the time necessary to accommodate those concerns,” Gray said.
Under the original legislation, the government wouldn’t step in on any claims less than $5 million. Insurance companies would have paid a deductible in 2003 equal to 7 percent of the premiums they received the previous year. The deductible rose to 10 percent in 2004 and 15 percent in 2005. The federal government would then cover 90 percent of everything above the deductible with insurance companies paying the other 10 percent.
Federal payments would be capped at $90 billion the first year, $87.5 billion the second year and $85 billion in the final year of the program. The measure didn’t cover the Sept. 11, 2001, attacks, which generated an estimated $40 billion in claims.
Julie Rochman, spokeswoman for American Insurance Association, said policy holders are demanding the swift extension in part because every community views itself as a potential target of terrorism.
“With hurricanes, we know they don’t hit Iowa and don’t hit in January,” Rochman said. “With terrorism, they can strike anywhere at any time.”
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