Congress adjourns without passing TRIA
The 113th US Congress adjourned last night without taking action on a bill addressing two critical insurance industry issues, leaving the future of several lines of insurance in doubt.
The House-passed bill to renew the Terrorism Risk Insurance Act and establish a National Association of Registered Agents and Brokers died when Sen. Tom Coburn raised objections to the bill in the final days of the Senate, implementing a procedural move that would have required approximately 30 hours of back-and-forth red tape to bring the bill up for a vote.
Senate Majority Leader Harry Reid, facing a dwindling amount of time to complete a large number of measures, never put the bill on the calendar.
Despite Coburn’s objections, TRIA Senate sponsor Chuck Schumer placed the blame on Rep. Jeb Hensarling, who added controversial additions to the bill that changed portions of the Dodd-Frank Wall Street reform act.
“Several weeks ago, I warned Speaker Boehner that if he followed Jeb Hensarling’s dangerous gambit, he risked killing terrorism insurance,” Schumer said in a statement. “Tonight, Sen. Coburn struck the final blow when he objected to bringing the bill to the floor.”
While insurance industry leaders are hopeful the issue will be addressed when a Republican-dominated Congress reconvenes in January, many expressed disappointment and uncertainty as to the effect of TRIA’s impending sunset.
“Without TRIA in place on January 1, insurers will be forced to assess their exposures,” said Leigh Ann Pusey, president and CEO of the American Insurance Association. “The program’s lapse will significantly jeopardize the terrorism insurance marketplace that currently protects our nation’s economy against major acts of terrorism.”
Insurance Information Institute President Robert Hartwig went further, anticipating an “immediate adverse effect on the US economy.”
“Terrorism insurance policies are going to lapse in 2015, and insurers will be under no obligation to renew them, adversely impacting the construction, energy and real estate industries, among others,” he said. “For instance, a theatre owner hosting a controversial movie premiere on Christmas Day may have insurance coverage for losses triggered by an act of terrorism but this same business might not have it if a comparable attack were to occur on New Year’s Day.”
Without the federal backstop granted by TRIA, insurers will turn to their roughly $3 billion of stand-alone capacity—though that number drops sharply in high risk cities like New York or Chicago, where capacity is closer it $1 billion.
Insurers will also no longer be obligated to offer terrorism insurance as part of property policies, which may lead to new exclusions and lower market penetration for standalone terrorism policies.
As a result, significant disruption in property and workers’ compensation lines is expected, as is the possibly delay in some major construction and public works projects.
by Caitlin Bronson | Dec 17, 2014
Posted: Dec. 19th