As widely anticipated, the U.S. Senate today, in a 93 to 4 vote, passed a seven-year extension of the Terrorism Risk Insurance Act. The legislation—authored by New York Congressman Chuck Schummer, along with Mark Kirk of Illinois, Bob Menendez of New Jersey, Mark Warner of Virginia, Dean Heller of Nevada, Jack Reed of Rhode Island, and Roy Blunt of Missouri—would make more modest changes to the current TRIPRA 2007 Act than that currently under consideration in the US House of Representatives.
Changes in the Senate Legislation
The Senate legislation proposes minor changes to the current program by incrementally raising the coinsurance contribution of insurers from the current 15% of loss, to 20% by 2019, once certified terrorism losses have surpassed the program “trigger” of $100 million. (A terrorism event must cause at least $ 5 million for a loss to be considered as “certifiable”.)
The Senate has also proposed an increased post-event recoupment from policyholders from the current $27.5 billion to $37.5 billion by 2019.
While the action today signals a significant step forward, the House of Representatives will still need to vote on its own version of the bill which will then have to be reconciled with the Senate bill before it can be sent to the President for his signature. With eight days left in session before summer recess for Congress, It is likely that final Congressional action will not take place until after Congress returns after Labor day. If action is not completed then, the legislation will have to wait for the expected lame duck session after the fall elections.
The current House proposal, which extends the current legislation for five years, includes more notable changes to the current legislation. In addition to increasing the coinsurance provision to 80%, it also raises the current $100 million trigger to $500 million for conventional terrorism events, and includes an “opt out provision” for small insurers, if proven that offering coverage could cause a “financial hardship” to meet the higher trigger level.
The Congressional polarization was evident in the comments by the House Financial Services Chairman, Jeb Hensarling, subsequent to the Senate vote today:
The House has passed dozens of jobs bills that the Senate has completely ignored, so I’m pleased to hear that the Senate is at least working today. While I appreciate the fact that the Senate has acted on TRIA, what’s most important is to get this done right for hardworking taxpayers. Unfortunately, the Senate’s bill is essentially a status quo bill that uses a phony Washington budget gimmick as a pay-for, meaning it can’t even come to the House floor as written.
I’m still committed to getting a bill passed, but it has become very clear this week that the process is going to take several more months before there is a resolution. We have a diverse Republican caucus in the House. We have some members who believe the reforms go too far and we also have a host of conservatives who feel the reforms don’t go far enough. Washington is paying a lot of attention to one group’s concerns, but not enough attention to the other’s. That’s got to change if any TRIA bill is going to pass.
As this process goes forward over the next several months, I will be using that time to discuss with all members how to continue the program and also make reforms that improve our stewardship of Americans’ hard-earned tax dollars.
Agent/Broker Licensing Clearinghouse
The Senate legislation also included the long sought after National Association of Registered and Brokers (NARAB) proposal, which will create a single, national, uniform agent/broker licensing clearinghouse for professionals operating in multiple states.
While still maintaining the requirement to hold a license in the home state of operation, NARAB should streamline the process of licensing in other states in which an agent/broker transacts business.
The Senate bill would establish NARAB, but it would sunset after two years; the House bill would establish it on a permanent basis.