National May 6, 2014

House TRIA extension bill would do more harm than good

Late Thursday a conceptual draft of a House TRIA extension bill was released. The bill, the Terrorism Risk Insurance Modernization Act of 2014, was written by House Financial Services Chairman Jeb Hensarling, R-Texas, and would extend the authorization of TRIA for only three years while also making some 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. This increase would be phased in over the course of three years. In addition, TRIM would lower the cap on non-NBCR federal payments to the industry to $75 billion from $100 billion.

More harm than good

While PIA appreciates the House acknowledging the need for a speedy reauthorization of the TRIA program, TRIM has the potential to do more harm than good. As PIA members across the country can attest, the looming sunset of the current Terrorism Risk Insurance Program has led many carriers to issue contingent renewals for terrorism coverage or withdraw from the market totally. By only re-authorizing TRIA for a period of three years, TRIM does little to provide market stability. Producers and carriers will almost immediately be faced with the same uncertainty they are experiencing now.

In addition, TRIMs new program trigger for non-NBCR events has the potential to drive many of the small to midsized carriers out of the market. These carriers are the life blood of many markets and their withdrawal from the market would lead to mass unavailability and soaring prices for the consumer. Many industries such as construction have already been forced to slow down or cease work completely due to raising rates in terrorism insurance, as many carriers withdraw from the market in response to the uncertainty surrounding the program. If TRIM were to pass, it has the potential to cause the terrorism market to shrink, which would have widespread effects on the nations economy.

Senate offers measured approach to TRIA

Introduction of TRIM comes about three weeks after introduction of a TRIA reauthorization bill in the Senate. Under the Senate version, TRIA would be extended for a period of seven years. Insurers copays would be raised to 20 percent from 15 percent and the recoupment of federal payments will be mandatory if the insurance industrys aggregate compensation loss is less than $37.5 billion, up from the current sum of $27.5 billion. This increase will be phased in over a period of five years. While these changes put more financial onus on insurance carriers, they do so in a manner that is both measured and gradual.

PIA supports a straightforward long-term reauthorization of TRIA and strongly advocates for a House version that brings us closer to that goal.

Call your members of Congress

PIA is encouraging its members to contact their local House representative to make them aware of these concerns surrounding TRIM. Tell them:

• We need more than a three-year extension of TRIA. Under the Senate version, TRIA would be extended for a period of seven years.
•  A $500 million trigger is too high and has the potential to drive many of the small to midsized carriers out of the market.
• The House TRIM bill has the potential to cause the terrorism market to shrink, which would have widespread effects on the nations economy.

Find and contact your congressional representative at: http://www.house.gov/representatives/find/. PIA will continue to keep you apprised of these and other issues as they arise. If you have additional staff you would like to receive these types of business-related alerts, be sure to send their names and e-mail addresses to: publications@pia.org.