The chairmen of the House Financial Services Committee and a key subcommittee yesterday challenged insurers and regulators to use the August congressional recess to work out changes in the federal terrorism insurance backstop that would meet White House and other Republican objections and allow the program to be renewed this fall.
The Terrorism Reinsurance Act (TRIA) provides for the government to pay a portion of damage caused by a foreign terrorist attack once certain thresholds are exceeded. TRIA has been credited for stabilizing insurance and related markets after the Sept. 11, 2001, attacks, but is scheduled to expire at the end of this year.
The Bush administration has been reluctant to extend the program unchanged on the ground that it exposes the government to unacceptable levels of risk while retarding development of private insurance to take over its role.
Chairman Michael G. Oxley (R-Ohio) of the Financial Services Committee and Chairman Richard H. Baker (R-La.) of its subcommittee on capital markets, insurance and government-sponsored enterprises, said yesterday that they agree with those criticisms and called on lobbyists to use the August recess to work out modifications to address them.
Oxley said "extension of the program without reform would be unwise."
Baker said an acceptable renewal bill would "need to upwardly adjust" the amounts paid by insurers in the event of an attack; require insurers to repay money provided by the government; and include a better "triggering mechanism" to determine the nature and size of an attack that would be covered by the program.
"Industry, get together and find a cheaper way to do this," Baker said.
Their comments came at a hearing of the subcommittee at which representatives of insurers, lenders, builders and others argued to continue the program in some form.
The Treasury Department last month released a study that concluded that on the whole TRIA has worked well. But it recommended changes to allow increased private coverage, including requiring an attack to cause $500 million in damages to trigger the federal program.
Baker said he worries that such a high trigger would work to the detriment of rural areas and small insurers.
"In Louisiana, you could pretty much take everything out of there and not get to $500 million, but it would be pretty significant for us," Baker said. "I do believe, however, that the Treasury Department has indicated a willingness to work with the committee over the August recess" to come up with an alternative for consideration in September, he said.
Rep. Barney Frank (Mass.), ranking Democrat on the full committee, urged members -- including, he said, some in his own party -- not to oppose a federal program on the ground that it is a subsidy for insurers.
"The prime beneficiaries are not the insurance companies. The prime beneficiaries are the insured. The insurance companies could walk away from this," Frank said.