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WASHINGTON, DC-The likelihood of an extension of the Terrorism Risk Insurance Extension Act of 2005, scheduled to expire on Dec. 31, has just increased with the US Senate's passage of the Terrorism Risk Insurance Extension Act of 2005 this morning. The bill, S 467, calls for the extension of TRIA for two years beyond its expiration date at the end of the year, as well as changes to the original legislation. For previous coverage, click here.
The US Congress originally passed TRIA in response to the Sept. 11 terrorist assault. The legislation instituted a federal backstop guaranteeing that the government would cover payouts exceeding $100 billion of insurers' annual liability in the event of future terrorist. The legislation, which ensures the availability of terrorism insurance, is supposed to help protect the economy by allowing investors and developers to continue insured projects.
The bill contains alterations to TRIA, including language that would increase the $5-million eligibility minimum required for the government to commence coverage to a $50-million minimum in 2006 and a $100-million minimum in 2007. And the Aggregate Retention Amount--the aggregate amount, for all insurers, of insured losses--would be $17.5 billion in 2006 and $20 billion in 2007. Additionally, the changes to TRIA as stipulated in S 467 would give the private sector insurance industry more responsibility for payouts to terrorism insurance policyholders.
The White House and the US Department of the Treasury have advocated the temporary renewal of TRIA, provided that certain provisions are in place. "The administration supports Senate passage of S 467," a statement of administration policy from the Executive Office of the President notes. The legislation is consistent with the administration's goals of further encouraging private market development and reducing taxpayer exposure by eliminating lines of coverage in the program, increasing industry deductibles and co-payments, and increasing trigger levels at which an event would become eligible for government funds. "The administration strongly supports the bill's exclusion of additional lines of coverage and will strongly oppose any efforts to add lines of coverage, including group life insurance, or further expand the program."
With the Senate bill passing, the US House of Representatives must pass a version of extension legislation before the two chambers can meet in committee to craft a single bill. The House has introduced HR 1153, the Insurance Backstop Extension Act of 2005, and referred it to the House Committee on Financial Services' Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises. Earlier this week, the Committee on Financial Services introduced, HR 4314, the Terrorism Risk Insurance Revision Act of 2005.
"Momentum is building for final congressional action on this necessary program," says Coalition to Insure Against Terrorism steering committee coordinator Martin L. DePoy. "Policyholders urge the full House to vote soon so that the backstop's continuation is assured."
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