Terrorism insurance 10-year extension suggested.

On June 18, Rep. Mike Capuano (D Mass.) and House Financial Services Committee Chairman Barney Frank (D-Mass.) introduced legislation (HR 2761) in the House of Representatives to extend the Terrorism Risk Insurance Act (TRIA) for 10 years. Congress passed TRIA in 2002 to create a federal backstop to protect against terrorism-related losses after many insurance companies excluded terrorism events from their insurance policies. In 2005, the measure was extended for two years and is currently set to expire at the end of 2007.

In addition to the 10-year extension, the bill includes several positive expansions strongly supported by NAA/NMHC. It adds coverage for domestic terrorism acts, thus eliminating the distinction between "home-grown" terrorism, such as the Oklahoma City bombing, and acts on behalf of a foreign person, and it requires insurance firms to cover nuclear, biological, chemical and radiological (NBCR) terrorism events. It lowers the trigger point at which the federal backstop kicks in from $100 million to $50 million to help small and mid-sized insurance companies manage their exposure under the program. It adds group life insurance to the program so people who work in insured buildings are also protected. Finally it creates a blue-ribbon commission to propose long term private market solutions for covering terrorism risk.

The House Financial Services Committee held a hearing on the bill June 21 during which both insurance and policyholder representatives expressed strong support for the bill. A Bush Administration representative from the U.S. Department of Treasury, however, opposed key provisions of the bill--including the NBCR provisions-and urged lawmakers instead to pass a short-term extension that further reduces the federal government's role by increasing the industry retentions.

NAA/NMHC urge swift passage of the bill. Companion legislation has not yet been introduced in the Senate.