WASHINGTON – A proposal to extend and modify the Terrorism Risk Insurance Act divided the House Financial Services Committee down party lines on Thursday, as lawmakers weighed the need for greater taxpayer protection against the economic harm of a terrorist attack.
The fractured discussion over Rep. Randy Neugebauer’s bill to reauthorize the terrorism risk insurance program comes in sharp contrast to the Senate Banking Committee’s unanimous vote on its own TRIA legislation earlier this month, which includes different, more moderate, changes to the program.
The two chambers are expected to iron out those differences in the legislation before TRIA expires at the end of the year. But for now, Thursday’s vote on the Neugebauer bill sets the parameters for ongoing negotiations between lawmakers on both sides of the aisle and across the chambers.
“We know what the issues are, we know what the points of debate are, but I’m still not exactly sure how this is going to end on the House side. How much is the House is willing to give?” said Isaac Boltansky, a policy analyst at Compass Point Research & Trading.
The House bill is scheduled for a recorded vote in the committee Friday morning, and it is expected to pass with strong GOP support, despite ongoing concerns by some Republican lawmakers.
The Neugebauer measure extends TRIA for five years, but also bifurcates attacks that are nuclear, chemical, biological or radiological from so-called "conventional" terrorism, raising industry costs for conventional attacks. The bill would phase in a higher trigger for the program in the case of a conventional attack to $500 million from $100 million, and insurers would be responsible for a 20% co-pay after a deductible following a conventional attack, compared with 15% for other kinds of attacks.
The Senate Banking Committee legislation, by comparison, would extend the program for seven years, and increase insurers’ co-pay for all attacks to 20% from 15% after a deductible. It would also raise the mandatory recoupment threshold for the government to $37.5 billion from $27.5 billion.
Conservatives in both chambers have continued to push for the program to be scaled back, putting more of the responsibility on the insurance industry in the wake of an attack. How the differences between the two bills will be reconciled – either through a conference committee or more informal, backdoor negotiations – is still up in the air. And how far either chamber will go in a compromise also remains up for debate.
“The House is going to try very hard to get something out of any conference with the Senate,” said Brandon Barford, a partner at Beacon Policy Advisors. “That decision will come down to what Republicans care more about – a slightly shorter reauthorization period, the threshold for when taxpayer money kicks in or whether certain types of attacks are treated differently? That's a decision that probably hasn't been made yet.”
Thursday’s debate illustrated how far apart House lawmakers remain on the issue. Rep. Jeb Hensarling, R-Texas, chairman of the banking panel, suggested that he’d make even more extreme changes to the program, if possible.
“Some may believe the bill goes too far, too fast. I respectfully disagree. By the industry’s own admission, taxpayers are currently forced to bear incalculable amounts of risk with only a fleeting promise that they might someday get a portion of their investment back,” he said. “I assure you if I was a committee of one, this is not the bill we would be considering today. For those who think it goes too far, too fast, I for one think it goes not very far and too slowly.”
Hensarling added that he would be willing to pass a six-month clean extension of TRIA if the Neugebauer measure were to fail in the committee vote or on the House floor, raising some concerns about how far he is willing to go in negotiations to keep some of the bigger changes to the program in place.
Still, looking more broadly, it’s not clear the banking panel chairman would be willing to push the issue too far with newly elected House leadership. Republicans elected Rep. Kevin McCarthy of California as their party’s majority leader Thursday afternoon following the loss of Rep. Eric Cantor in Virginia’s primary earlier this month.
“This debate and future negotiations are occurring in a broader context -- leadership doesn't want to push Hensarling too far when they're brand new, and McCarthy isn't going to change or undo the committee's work in this short of a time frame,” said Barford.
Moreover, even Republicans who raised ongoing concerns with some of the bill’s provisions as going too far indicated they were ultimately supportive of passing the measure.
“I still have strong problems the legislation in its current form,” said Rep. King, R-N.Y., who said he would nonetheless vote for the bill to keep the process moving forward. “It’s not a bill I would vote for on final passage on the House floor … but I think we can go forward and make more progress on it.”
But Democrats also raised warnings about the changes to the program laid out in the Neugebauer bill, praising the Senate’s bipartisan efforts instead.
“While the proposal we consider today has come a long way from those initial drafts, I join with lawmakers, policyholders and insurers in continuing to express serious concerns. I’m disappointed that Republicans would not work with us to make changes that would have made this markup a bipartisan on,” said Rep. Maxine Waters, D-Calif., the ranking member on the panel. “In its current form, I believe that … this bill will jeopardize a program that has created jobs, spurred economic growth, and protects our nation’s economy from the costs of a terrorist attack.”