House Will Vote Anew on Terrorism Bill

Next week the full U.S. House of Representatives will take up a revised extension of the Terrorism Risk Insurance Program, offering some concessions to a Senate-passed bill but still proposing significant expansion of the $100 billion federal backstop.

Published on December 7, 2007

The newly revised House bill debuted yesterday before the House Rules Committee, which scheduled a vote on the issue by Dec. 12, the chamber's deadline for consideration of non-appropriations bills. But with a threatened presidential veto of several House provisions still looming, and with the current program set to expire Dec. 31, industry sources are concerned the latest action might bring negotiations to the brink, or beyond.

In nods to the version of the Terrorism Risk Insurance Program Reauthorization Act passed unanimously by the Senate Nov. 16, House leaders have scaled back the length of the extension from 15 years to seven and dropped a mandate that insurers must offer coverage for nuclear, chemical, biological and radiological attacks.

The amended bill also would adopt Senate language that looks to comply with pay-as-you-go budget rules by accelerating the dates by which the industry would have to comply with mandatory recoupment provisions.

But despite veto warnings handed down in September from the White House Office of Management and Budget, House leaders opted to keep Bush administration-opposed language creating a separate $5 billion recoupment pool for group life insurance risks and lowering the program's trigger level to $50 million from the current $100 million. The bill also includes a "reset" mechanism sought strongly by New York's delegation that would offer lower trigger levels and deductibles to areas that experience more than $1 billion in insured terrorism losses.

For group life insurers, inclusion in the TRIA program comes as something of a welcome surprise, after seeing the group life provisions stricken from the Senate bill. However, the measure also includes language -- based on a bill originally introduced by Rep. Debbie Wasserman-Schultz, D-Fla. -- that would limit life insurers' ability to consider applicants' past travel or future lawful travel plans when underwriting policies.

"The process still isn't over, but we are pleased that group life is still on the table," American Council of Life Insurers spokesman Steven Brostoff said. If ultimately adopted, the federal backstop would offer up to $1 million of coverage per certificate holder under any group life policy, including term, accidental death, universal, and variable universal life.

However, other segments of industry have viewed the House's action as a troubling development, fearing it could risk exposing the measure to a filibuster by Senate Republicans or a veto by President Bush. Critics of the program -- such as Senate Banking Committee Ranking Member Richard Shelby, R-Ala. -- have characterized the bill that chamber passed as a "best offer," while House Democrats, led by Financial Services Committee Chairman Barney Frank, D-Mass., have pledged they would not be cowed into a "take it or leave it" approach to negotiations.

Should negotiations extend past the expiration, and the backstop be allowed to lapse, it could wreak havoc in commercial property markets, according to Jason Schupp, senior vice president with Zurich North America. Schupp noted most commercial policies have been written with conditional endorsements, sometimes referred to as "pop-up" exclusions, that would negate terrorism coverage if a backstop is not in place after midnight Dec. 31.

"What's interesting about those endorsements is that there's nothing in those forms, at least not in the standard or typical forms, which would 'untrigger' it if TRIA were extended as of, say, Jan. 15," Schupp said. "There would be a fairly significant operational challenge and some confusion if we did have this gap in time, as any later extension would have