Terrorism risk insurance extension crosses first hurdle, faces many more.

Earlier this month, the House Financial Services Committee passed legislation that will extend the Terrorism Risk Insurance Act by another 15 years.

The move is aimed at helping spur the further development of a private market for terrorism risk insurance.

After the 9/11 terrorist attacks, many insurance companies excluded terrorism events from their insurance policies. As a result, Congress passed TRIA as a three year temporary program in 2002, which created a federal backstop to protect against terrorism related losses. In 2005, the measure was extended until 2007. TRIA is now set to expire at the end of this year, unless Congress acts again to extend the law.

Since its enactment, TRIA has ensured the availability of affordable terrorism risk insurance in the marketplace and thereby fostered continued urban development and real estate development in the United States. While the TRIA program has successfully kept terrorism insurance affordable, the President's Working Group on Financial Markets' most recent report concluded that a private market for terrorism reinsurance is virtually nonexistent--especially with regard to nuclear biological chemical and radiological (NBCR) acts of terrorism.

The Terrorism Risk Insurance Revision and Extension Act of 2007 (TRIREA) will include provisions to:

Extend TRIA for 15 years with current co-payments and deductibles for conventional terrorism acts; Expand TRIA's "make available" requirement to include NBCR coverage; Change TRIA's definition of terrorism to include acts of domestic terrorism;

Set the program trigger at $50 million; Add group life insurance to the lines of insurance for which terrorism coverage must be made available; Decrease deductibles for terrorist attacks over $1 billion and decrease the trigger after such events; and,

Continue to require studies of the development of a private market for terrorism risk insurance.

The Coalition to Insure Against Terrorism (CIAT) welcomed the House decision and has urged passed of the Terrorism Risk Insurance Revision and Extension Act when it comes before the full House membership at the end of the year.

CIAT Steering Committee coordinator Martin DePoy said the original TRIA legislation and its existing successor legislation, TRIEA, helped to keep the U.S. economy functioning in the wake of the 9/11 terrorist attacks by making terrorism risk insurance available at prices commercial policyholders could afford.

However, the current TRIEA law will expire at the end of 2007.

Said DePoy, "TRIREA is essential to maintaining the security of the nation's workers and businesses against the threat of terrorist attacks after the expiration of TRIEA at the end of this year. It is an absolutely vital element of our economic homeland security, and we applaud the House Committee on Financial Services for recognizing and responding to this critical need."

Especially important to the various policyholder groups that are CIAT's members, according to DePoy, are provisions of TRIREA that would lengthen the term of the program to 15 years; give businesses the ability to secure NBCR coverage under the same terms and conditions as for conventional risks; eliminate the existing legislation's distinction between foreign and domestically-sponsored acts of terror; and reduce the program's trigger level.

"We are grateful for the leadership the House Committee on Financial Services has shown in moving this legislation forward," DePoy said, "and we urge the full membership of the House to give it their support."

However, not everyone is pleased with the Financial Services Committee's decision.

Treasury Assistant Secretary for Financial Institutions David G. Nason said, "The Administration has frequently stated the need for three critical elements in TRIA reauthorization: the program should remain temporary and short-term, with no expansion and a continued increase of private sector retention. Today's effort to extend TRIA does not meet these standards for an improved market and we strongly oppose this bill.

"We are particularly disappointed with the Committee's decision to extend the program for 15 additional years. This extension runs counter to the public policy goal of reducing and eventually eliminating the federal government's role in the terrorism insurance market, and it sends the wrong message to the marketplace for a program that was intended to be temporary.

"As the bill moves through the legislative process, the Administration looks forward to working with the Congress to pursue an improved TRIA."