Deal May Extend TRIA 6 Years; NARAB-II in Doubt

By Arthur D. Postal
InsuranceNewsNet

House and Senate negotiators are closing in on an agreement that would extend the Terrorism Risk Insurance Act for six years.

The reports indicate that the deal being drafted would gradually raise the current insurance deductible to perhaps $200 million or $250 million over five years. The deductible is now $100 million. Specifically, that means that aggregate insured losses from terrorism must exceed $100 million in a single year for the program to be activated.

That is good news for the entire industry, because legislation reauthorizing TRIA is the likely vehicle for enactment of two provisions sought by the life insurance industry. They are a provision granting the Federal Reserve explicit authority to create insurance-specific capital and liquidity requirements, and a provision re-creating the National Association of Registered Agents and Brokers (NARAB). The latter is a key priority of the National Association of Insurance and Financial Advisors (NAIFA) and the Insured Retirement Institute (IRI).

Any final insurance-specific legislation is likely to be tucked into a continuing resolution needed to keep the government running that has to be passed by Congress before Dec. 11, when the current appropriations authority runs out.

Negotiations on the insurance provisions have been under way for several weeks between Sen. Charles Schumer, D-N.Y., and Rep. Jeb Hensarling, R-Texas, chairman of the House Financial Services Committee, joined by other members. Several meetings dealing with the issue were held Wednesday.

On TRIA, the Senate bill raised the insurer co-pay from the current 15 percent to 20 percent and the mandatory recoupment from $27.5 billion to $37.5 billion [over five years]. But, it retains the current $100 million trigger for federal involvement in a terrorism event.

The House bill H.R. 4871, the TRIA Reform Act of 2014. That bill calls for gradually increasing the program trigger for all non-nuclear, biological, radiological, and/or chemical (NBCR) events, from $100 million to $500 million by 2019. Industry officials say that would effectively phase out the program for non-NBCR events.

The House, according to officials, is willing to drop the so-called “bifurcation” provision, which would eliminate federal involvement in non-NCBR terrorist acts. It is still demanding an increase in the trigger and offsets under congressional mandates that require cuts in other programs to finance a program. The emerging compromise is to hold a separate vote in the House on a bill that would waive the offset provision. Such a waiver has strong support in the House, but it is opposed by a minority of conservatives.

Enactment of NARAB-II would create an organization whose specific jurisdiction would be the oversight of insurance producer reciprocal non-resident licensing and continuing education standards on a national – not federal – level, according to NAIFA.

For NAIFA members, any producer (individual or agency) licensed in their home state could choose to apply to NARAB and submit to a federal criminal background check, the trade group said.

Accepted NARAB members would pay a membership fee as well as all requisite state licensing fees for each state in which they choose to do business. Under the draft being used to craft a compromise between the House and Senate bills, members of NARAB would be held to a single non-resident licensing and continuing education standard for each line of authority.

The NARAB standards would be determined by a 13-member board made up of eight insurance commissioners and five individuals with relevant expertise and experience in producer licensing, NAIFA said.

Generally similar language on NARAB-II is contained in bills passed by the Senate and House on creating the new agency.

However, the Senate bill does contain a provision demanded by Sen. Tom Coburn, R-Okla., that will require another vote to sustain NARAB within two years of the time it is up and running. However, according to a number of InsuranceNewsNet sources, the House version of the NARAB bill is being used as the starting point for negotiations. It does not contain the Coburn amendment.

“NARAB II would benefit consumers through increased competition among agents and brokers and greater consumer choice, as well as continuity of client services,” NAIFA says in a policy statement. “The legislation also would provide higher and more consistent national consumer protections for those agents utilizing NARAB,” the statement said.

In comments on the Senate floor in June, when the TRIA bill containing the NARAB-II provision was considered, Sen. Mike Crapo, R-Idaho, ranking minority member of the Senate Banking Committee, said, “The idea for NARAB is now 14 years old. We've been working on it literally for that long, and I'm hoping that in this legislation today we can get it across the finish line."

In his comments, Crapo said that under the NARAB provisions, insurance commissioners of the states “will be able to better catch bad actors who after losing a license in one state more quickly to enter into another state.”

Crapo also said that state regulators will serve on the board of NARAB “with the same objectives they have as an insurance commissioner -- to protect the public interest by promoting the fair and equitable treatment of insurance consumers.”

He added that the creation of NARAB will allow agents and brokers to focus on their responsibilities to their clients and spend less time dealing with red tape.

By reducing costs and increasing competition among insurance producers, we will generate lower costs and better service for consumers,” he said.

Importantly, Crapo said, NARAB deals specifically with marketplace entry and “would not impact a state’s jurisdiction over day-to-day authority in the insurance marketplace. This is a very critical point, because I think probably the biggest issue relating to this legislation is preserving and protecting state’s rights and state jurisdiction with regard to regulation of the insurance marketplace.”

Arthur D. Postal has covered regulatory and legislative issues for more than 30 years in Washington, D.C. He can be reached at [email protected].

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