National Jun 20, 2014

U.S. House committee passes bill to reauthorize TRIA

The U.S. House Financial Services Committee considered and passed by voice vote a bill, H.R.4871, to reauthorize the Terrorism Risk Insurance Act for five years. The bill was introduced by House Financial Services Chairman Jeb Hensarling, R-Texas, and in addition to reauthorizing TRIA also would make several major changes to the program. The most radical change to the program is the introduction of a new program trigger for all non-nuclear, biological, radiological, and or chemical events from $100 million to $500 million. TRIM also will reduce the federal co-pay share of insurers losses for non-NBCR covered events from 85 to 80 percent.

H.R.4871 also was amended during the committee meeting to include a provision that would create the National Association of Registered Agents and Brokers. NARAB II would provide nonresident licensing reciprocity among states by creating a not-for-profit corporation that would establish membership criteria, and grant a license that would enable the producer, duly licensed in his or her home state, to sell products that he or she is licensed to sell in their home state, in any state. Previously, NARAB II passed the House as a standalone bill (H.R.1155), but has yet to be taken up in the Senate as a standalone issue.

Earlier this month, the Senate Committee on Banking, Housing and Urban Affairs unanimously approved its own Terrorism Risk Insurance Program Reauthorization Act (S.2244). The Senate bill would reauthorize the program for seven years, with two major changes to the law, both with a five-year phase-in: First, similar to H.R.4871, the Senate bill would increase insurers co-share of insured terrorism losses from 15 percent to 20 percent, with the government moving from taking on 85 percent down to 80 percent under the proposal. Second, it increases the amount of losses that the insurance industry as a whole incurs for which mandatory recoupment of the federal share of the loss will be imposed by $10 billion, to $37.5 billion.

The next step in the legislative process is for the full House and Senate to vote on their respective bills to reauthorize the program. Both chambers will then need to reconcile their respective proposals. It is anticipated that this will take a considerable amount of time and negotiation between the two houses as their versions include many differences. With that in mind, in addition to H.R.4871, Hensarling has also proposed a seven-month extension of TRIA. This proposal would leave the program unchanged and give Congress a bigger window in which to negotiate a longer term extension.

To read PIAs position on TRIA, click here.