Insurers are hoping that Congress will renew the terrorism risk insurance program when they return for the lame duck period before its Dec. 31 expiration day. But they worry that House Republicans seeking reforms could push the reauthorization into next year, a scenario they say could lead to chaos in the markets for commercial insurance.
“People are very worried that if they can’t come together and get this done that Congress may choose to punt, to kick the can,” said Nat Wienecke, a senior vice president for federal government relations for the Property Casualty Insurers Association of America.
The Terrorism Risk Insurance Act, known as TRIA, requires property and casualty insurers to cover losses related to terrorism and provides a government backstop for losses caused by terrorist attacks. Created after the Sept. 11, 2001, terrorist attacks shut down the terrorism insurance market, the program has been extended twice, but its authorization runs out at the end of the year.
Businesses ranging from the National Football League to Campbell’s Soup have called on Congress to renew the program so that they can insure against terrorist attacks and get funding for projects.
But they have run into opposition, mainly from conservative Republicans on the House Financial Services Committee led by Chairman Jeb Hensarling of Texas who see the program, which has not paid out any claims, as a subsidy for businesses. A number of House Republicans want to at least increase the share of potential losses that would be borne by the private sector, if not end the program outright.
At an appearance at the Financial Services Roundtable in September, Rep. Paul Ryan, R-Wisc., predicted that the program would not pass the House until conservatives had a chance to reform it, whether that was during the lame duck or next year, following a short-term reauthorization.
“The way I see this coming down is, it’s going to get extended,” Ryan said. “The question is: Do you do reforms now and negotiate, or do you just do a short-term extension into next year and then do negotiations?”
It “is entirely possible … that the House will demand a six-month extension so that a Republican Senate next year is a better negotiation partner for their position,” said R.J. Lehmann, an analyst at the right-of-center R Street Institute. “It depends on how strongly the House leadership wants to back the Financial Services Committee chairman.”
Although members of the insurance industry regard that scenario as somewhat unlikely, they worry that uncertainty over reauthorization is already hurting parts of the insurance market and a short-term measure would make things worse.
For now, they have been including riders on contracts that extend into next year stipulating that policyholders lose terrorism coverage if TRIA is not reauthorized or is dramatically altered. Those riders are problematic for businesses that have loans that require them to have terrorism insurance, and could be forced into technical default if TRIA is not reauthorized. They’re also trouble for businesses in states that require certain forms of terrorism coverage, such as insurance for fires caused indirectly by terrorist attacks or for worker’s compensation related to an attack.
That uncertainty, insurers say, would be exacerbated by a six-month extension like the one plotted by Republicans, given that insurance contracts are set for at least a year at a time and lending is done on an even longer time frame. A six-month bill holds up business.
“Most in the industry stop short of saying a six-month reauthorization would be worse than no reauthorization, but sometimes you get the sense that’s what they want to say,” said Jonathan Bergner, a federal affairs officer for the National Association of Mutual Insurance Companies.
Meanwhile, TRIA enjoys strong support in the Senate, where a seven-year reauthorization including some modest reforms passed 93-4 in July. It also has fairly broad support in the House, including Democrats and many Republicans.
Randy Neugebauer, a Texas Republican on the committee, introduced a bill to extend TRIA for five years but would require higher co-pays from the industry. While that bill has not advanced past the committee, industry officials are optimistic that a compromise between the Senate and the House measure could be hammered out when Congress returns after the November elections.
Saying that he expected a compromise between the Senate and House bills, one industry lobbyist said, “I simply don’t think there’s enough votes in the House or Senate to pass a short-term extension.”
Nevertheless, the lobbyist acknowledged that it was an outside possibility.
“A short-term extension just kicks the can down the road and makes businesses think twice about expanding,” he warned.
