Congress Passes TRIA Extension

Congress has passed a two-year extension of a federal terrorism reinsurance program, which the president is expected to sign before the current Terrorism Risk Insurance Act expires on Jan 1.The final bill (S. 467) increases private insurers' exposure if there is another serious terrorist attack, and it largely reflects the Senate's bill. House provisions designed to help the insurance industry move toward a private solution to terrorism insurance were dropped during a House-Senate conference. House Financial Services Committee Chairman Michael Oxley, R-Ohio, complained that the bill does not include real reforms. "In this short-sighted legislation, we have missed a golden opportunity to frame the TRIA program more effectively and to move toward a market-based solution," Rep. Oxley said. Despite the limited scope of the bill, real estate and financial services interests consider passage a major victory, since it will ensure the availability of terrorism insurance for commercial real estate properties. The final bill passed by the House and the Senate requires property-and-casualty insurers to continue to offer terrorism insurance policies. It requires the federal government to back up private insurers if insurance losses due to a terrorist attack exceed $50 million in 2006, and $100 million in 2007. The current trigger for the government to step in and pay claims is $5 million. The bill (S. 467) also increases deductibles and co-shares that shift more costs to the private insurance companies.