Terrorism Insurance Extension Advances; Group Life Included in House (Not Senate) TRIA Bill
On November 16, the House Financial Services Committee approved a two-year TRIA bill (H.R. 4314) by 64-3. The Senate Banking Committee also approved a TRIA bill (S. 467) the same day by voice vote. The versions differ. Below is a short summary mainly of the House bill, which includes group life insurance. The Senate version does not include group life insurance, which is expected to make the House-Senate conference contentious. Senate Majority Leader Bill Frist (R-TN) said S. 467 is being prepared for an expedited vote on the Senate floor, which could happen soon. The TRIA program expires December 31, 2005.
In general, the House bill raises the deductibles on all lines of insurance from their current level of 15 percent, increases the co-shares for smaller events while decreasing them for a mega-event (such as the September 11th attacks), significantly increases the amount of insured losses that would be necessary to trigger the federal backstop, and builds up capital reserves to stabilize the marketplace by allowing insurers to treat a portion of their terrorism premiums as dedicated terrorism capital.
Specifically, H.R. 4314 covers commercial property insurance, commercial casualty insurance, and workers' compensation insurance, and adds group life insurance, which is not included in current law (P.L. 107-97). Under H.R. 4314, insurers' deductibles vary by the line of insurance. Under the extended program, the bill sets deductibles at 16 percent for workers' compensation, 21.5 percent for group life, 20 percent for property, and 25 percent for casualty.
Insurers would be required to offer coverage for losses caused by nuclear, biological, chemical, and radiological (NBCR) attacks, but they would have more flexibility on forms and an ability to limit their exposures.
Unlike the House bill, the Senate bill does not add group life insurance; nor does it expand coverage to include attacks perpetrated by domestic terrorists. And unlike the House measure, the Senate bill does not require companies to offer coverage for NBCR attacks. The Senate bill requires a President's Working Group on Financial Markets to complete a study and report to Congress by September 30, 2006, on the long-term availability and affordability of terrorism risk insurance and the availability and affordability of group life insurance.
The following amendments to the House bill were approved by the Financial Services Committee:
- A manager's amendment (Chairman Mike Oxley, R-OH) to make technical changes to the legislation, adjust trigger levels, and raise deductible levels for group life insurance (20 percent to 21.5 percent).
- An amendment by Ranking Member Barney Frank (D-MA) to adjust the minimum requirements to be considered an exempt commercial purchaser, with respect to streamlining policyholders' ability to access the surplus lines marketplace.
- An amendment by Rep. Debbie Wasserman Schultz (D-FL) to limit the ability of life insurers to charge higher premiums to clients who travel to countries such as Israel. Prompted by this amendment, Rep. Judy Biggert (R-IL) asked the committee to hold hearings in 2006 on life insurance. Rep. Paul Kanjorski (D-PA) remarked he would like to see the hearings take place and include a discussion of an optional federal charter.
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