What’s Next for TRIA? | Wolters Kluwer Financial Services
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  • What’s Next for TRIA?

    Sheila Coolidge

    by Sheila Coolidge, Senior Insurance Compliance Analyst, Insurance Compliance Solutions

    Published December 23, 2014

    Since failing to vote on renewing the Terrorism Risk Insurance Act (TRIA) prior to adjournment last week, the U.S. Congress has been steadily criticized by many economic interests, including loud and clear frustration expressed by insurance industry representatives. By operation of law, TRIA expires December 31, 2014, leaving commercial lines insurers without a Federal “backstop” for terrorism coverage and potentially large risk exposure. In the closing weeks of the session, it appeared that the U.S. House of Representatives and Senate had crafted a compromise bill that would have reauthorized TRIA for six years, raised the insurers’ copayments from 15% to 20% and increased the government reimbursement from $100 to $200 million. The House had overwhelmingly approved the bill but it was blocked from a Senate vote due to the objections of Senator Tom Coburn (R-Okla.). Senator Coburn objected to provisions (unrelated to terrorism coverage) included in the bill that would create a national registry of insurance agents and brokers (NARAB). Although this provision had widespread support from state insurance regulators and insurers, Senator Coburn viewed it as a Federal infringement on state regulatory authority. As a result of this unrelated “add on” to the legislation, Senator Coburn placed a “hold” on the bill and effectively blocked the Senate from voting; due to this procedural maneuver, TRIA was allowed to sunset. Significantly, Senator Coburn is retiring at the end of this Congressional session.

    What’s next? Both Democratic and Republican legislators have indicated that TRIA will be revived when the new Congress reconvenes in January. Incoming House Whip John Cornyn (R-Tex.) was quoted as saying that TRIA reconsideration will be “number one in a long list of things we need to do.” Some legislators appear optimistic that a bill with similar provisions to the recent compromise bill can be approved by both the House and Senate next time around; however, others view this as another opportunity for the partisan Congress to attempt to further scale back Federal involvement with terrorism coverage and shift the risk to private insurers. In the meantime, underwriting uncertainty continues as policy renewal cycles must continue despite the lack of action from Congress. Many policies are written on a calendar year basis making January 1 a common renewal date. Some terrorism risk policies have exclusions that void coverage in the event of TRIA’s expiration. For months, underwriters have been challenged to write renewal policy terrorism coverage with little guidance. NAIC President and North Dakota Insurance Commissioner Adam Hamm expressed the thoughts of many when he stated “The NAIC will work with insurers, policyholders, and the business community during this time of uncertainty in the market, as American businesses will have to make tough decisions regarding coverage. We hope that this disruption will be short-lived and urge the new Congress to act quickly to reinstate this critical program.”

    Editor’s Recommendation: Keep up to date with terrorism coverage legislation with NILS INsource and Insurance Law Daily.

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