WASHINGTON – Insurance industry officials said this afternoon that Senate action on reauthorizing the Terrorism Risk Insurance Act (TRIA) is likely Thursday, a decision obviously made against the background of today’s terrorist attack on a Paris magazine office that killed 12 people.
Under expedited rules, the House today shoved through a version of legislation supported by the insurance industry reauthorizing TRIA. The vote was 416-5.
“It's essential that we pass it today -- it's essential that we pass it today,” added Rep. Peter King, R-N.Y. He said failure to reauthorize TRIA “could have a devastating effect on the construction industry and on the American economy, if it's not renewed as quickly as possible. It has to be re-authorized; it's absolutely essential.”
“Unless Congress swiftly re-authorizes TRIA, our economy will be dangerously exposed if we have another terrorist attack,” Rep. Carolyn Maloney, D-N.Y., manager of the bill for the Democrats, said in comments on the House floor during debate.
In fact, Maloney said, “One of the financial rating agencies, Fitch, said if Congress doesn't re-authorize TRIA by the end of January, they are going to start downgrading companies and major construction projects which would hurt the American economy. And the other rating agencies have made equally strong statements about the importance to re-authorize TRIA.”
“Already companies are having trouble getting terrorism insurance,” she added, “and many companies that had terrorism insurance have now lost it because there were clauses written into their policies that said if TRIA is not there, they do not have the insurance coverage.”
Her comments were buttressed by Carol J. Patterson, a construction law and litigation expert and partner of Zetlin & De Chiara in New York. Patterson said today that having TRIA available in the case of a catastrophic terrorist attack is critical.
Patterson said that many construction lenders require terrorism coverage as a condition for funding projects. “Expiration of TRIA raises the risk that borrowers could unexpectedly find themselves in default of their loans,” she said. “Without this insurance, it is possible that some projects that would have otherwise moved forward could come to a stop.”
She cited sports stadiums, major transportation projects, “indeed, many large-scale projects can generate more than $100 million in damages, the amount that triggers the TRIA federal backstop.”
TRIA is a vital component of the recovery of the real estate market in New York and elsewhere in recent years, Patterson added.
“It is part of the fiber that supports the real estate and construction industry building large-scale projects in New York and elsewhere,” Patterson said. “It should not be perceived as just a New York issue; it is really a national issue.”
The House bill would extend TRIA for six years. It would raise the current $100 million trigger for federal involvement in handling claims over a terrorist attack gradually to $200 million. There would be no change in 2015, but the trigger would be increased $20 million a year for the next five years to reach the $200 million. The current government “cap” of $100 billion would remain under the legislation.
The deal also calls for a gradual rise in the co-pay from the current 15 percent to 20 percent over the life of the bill. Under the agreement, there would be no increase in 2015, but a 1 percent increase for the next five years.
The legislation also includes a provision re-establishing the National Association of Registered Agents and Brokers (NARAB II), which has been a goal of both the life and property/casualty insurance agent communities for a number of years.
Officials of six trade groups representing agents in both life and property/casualty insurance said today in a letter to the House leadership that enactment of NARAB II is a “top priority for our organizations.”
A version of NARAB was included in the Gramm-Leach-Bliley bill of 1999, but it contained a provision which stated that it would not be implemented if an agreed-to number of states agreed to modernize their insurance agent licensing requirement. That threshold was realized, and NARAB never went into operation.
The letter said creation of NARAB II “would achieve much-needed reciprocity in producer licensing and help policyholders by permitting greater competition among agents and brokers.”
Those signing the letter included the American Association of Managing General Agents (AAMGA), the Council of Insurance Agents & Brokers (CIAB), the Independent Insurance Agents & Brokers of America (IIABA), the Insured Retirement Institute (IRI), the National Association of Insurance and Financial Advisors (NAIFA) and the National Association of Professional Surplus Lines Offices (NAPSLO).
Rep. David Scott, D-Ga., touched on NARAB II during the short House floor debate on the bill.
Calling insurance agents the “life line of the American people,” Scott said that “what this is doing here is making sure we streamline the [agent licensing] process, making sure that our insurance agents are able to operate across state lines.”
“We all realize that insurance is a state-licensed, state-authorized operation,” he added. “NARAB does not interfere with that; as a matter of fact, all 50 states have agreed with NARAB.”
He said people in the U.S. “live in a highly mobile society now,” and that it is “very important for our agents to be able to go across state lines with one licensing procedure that is held to the highest standard while at the same time being licensed in their own state.”
Scott said Congress has “had great cooperation from all of our insurance agents, including the insurance agents association, our financial advisors and our brokers all agree.”
“Many of us in the Financial Services Committee have been working on this measure for 10 years,” he said. “We've been toiling in the vineyards on this and so have others in the Senate."
“Now is the time to give our insurance agents the respect of the nobility of purpose of their very fine profession, and at the same time reach our primary goal, which is to give the American insurance consumers the choice, the competition and the benefits that they need,” Scott said.
Sources said that Senate action on the bill will include allowing a floor vote on an amendment proposed by Sen. Elizabeth Warren, D-Mass, pertaining to the Dodd-Frank Act. More about that may be found here.
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],