House TRIA drama upstages Senate’s passage of bill

July 17–The Senate passage of a seven-year extension Terrorism Risk Insurance Program Reauthorization Act of 2014 (S. 2244) 93-4, complete with the package of National Association of Registered Agents and Brokers legislation (NARAB II) as an amendment, doesn’t mean the package will move to a complete legislative bill ready to sign anytime soon.
Division among various interests in the House to delay the legislation in the House, despite the smooth passage in the Senate. The current law, which expires at the end of this year.

House Financial Services Chairman  Jeb Hensarling of Texas
House Financial Services Chairman Jeb Hensarling of Texas

In the past two days, the GOP whip operation has polled Republican members and those the whip counts have been mixed, which signal delay as loud as anything, as sources noted.
House Financial Services Committee Jeb Hensarling, R-Tx., led his committee to pass a five-year extension bill in mid-June that would treat conventional and nuclear chemical biological and radiological (NCBR) terrorist attacks differently, increase in the trigger for government payouts associated with conventional attacks and increased mandatory recoupment amounts.
As of this week, despite being tentatively on the House calendar for a floor vote, H.R. 4871 did not poll well, even before a whip count was attempted, with 218 votes still unlikely with the House bill as-is, sources close to the process said. Now that Hensarling has stated that, “Unfortunately, the Senate’s bill is essentially a status quo bill that uses a phony Washington budget gimmick as a pay-for, meaning it can’t even come to the House floor as written.”
Supporters of the TRIA extension are now looking at months before enactment, possibly, when just last week major insurers who supported both the Senate and the House versions were thinking in terms of days or a couple of weeks.
Certainty is of high value for insurers and commercial realtors as policies come up for renewal and no one knows exactly how to underwrite them.
The author of the bill and chair of the Housing and Insurance Subcommittee, Randy Neugebauer, R-Tx., and the House Leadership are fully behind the bill as passed by the Committee, and a Neugebauer aide underscored the point that a watered-down House bill was not welcome on the House floor. If it comes to the House floor, the bill will not be changed in any major, substantive way, he said.
Indeed, there are some members who feel it does not go far enough, not just those that think it goes too far in its widening of industry funds and capacity over time.
The House bill is supported by major insurers, producers, realty groups and associations and others. Small insurers openly oppose the $500 million trigger and not many don’t embrace the bill despite an opt-out provision on some measures.
The next few months -despite many fewer legislative days on the calendar– will be ones where the House Financial Services Committee leadership helps educate members who are not familiar with the TRIA program, and those that need help understanding the parameters of the bill, according to the Neugebauer aide, who indicated there is no rush and that they will be patient.
The six-month temporary extension will only come into play if the House cannot agree by ore before Christmastime.
“I’m still committed to getting a bill passed, but it has become very clear this week that the process is going to take several more months before there is a resolution….Washington is paying a lot of attention to one group’s concerns, but not enough attention to the other’s. That’s got to change if any TRIA bill is going to pass,” Hensarling stated.
“As this process goes forward over the next several months, I will be using that time to discuss with all members how to continue the program and also make reforms that improve our stewardship of Americans’ hard-earned tax dollars.”

On the action of the day, or as Hensarling put it, “…I’m pleased to hear that the Senate is at least working today,” in reference to the passage and the fact they have ignored job bills sent over to their chamber, insurers and other groups praised the Senate bill.
The Property Casualty Insurers Association of America (PCI) “commends the Senate for passing the Terrorism Risk Insurance Program Reauthorization Act of 2014. This long-term legislation will minimize the disruptions, maintain the availability and affordability of terrorism insurance for consumers, and protect taxpayers,” stated Nat Wienecke, senior vice president, federal government relations “It is great to see members of both parties come together in a broad bipartisan fashion to support America’s economic resiliency plan to recover from terrorist attacks.
“The strong bipartisan vote reflected a relatively smooth process through which the legislation was produced by the Senate Banking Committee, under the leadership of Chairman Tim Johnson of South Dakota and ranking Republican Sen. Mike Crapo of Idaho. The legislation tweaks the industry’s deductibles,” noted Joel Wood, The Council’s senior vice president for government affairs.
The tweaks include increases the “industry recoupment” by $2 billion a year to an overall level of $37.5 billion, and increases the insurer coinsurance level from 15% to 20% over five years.
The Senate legislation, S.2244, is strongly supported by the Administration, many sectors of insurance and commercial policyholder community, the real estate industry and the U.S. Chamber of Commerce. S. 2244 is opposed by the Heritage Foundation, the Consumer Federation of America and the free-market oriented insurance policy thinktank,  R Street Institute.
“Reauthorizing the program will ensure that the American economy remains resilient against the threat of terrorism. The Administration supports swift passage of this legislation and looks forward to working with Congress on this reauthorization and reform process,” came the statement from the WHite House before the vote.

But,according to R Street Senior Fellow R.J. Lehmann, “unlike H.R. 4871, the TRIA Reform Act … the Senate’s proposed seven-year extension fails to make appropriate changes to the program to shift more risk to the private sector.”
As Lehmann noted, the Senate bill does make modest adjustments to the federal share of terrorism losses, which gradually would be scaled back to 80 percent from the current 85 percent, the House bill goes further by raising the trigger level for coverage for conventional terrorist attacks to $500 million.
“Reinsurance broker Guy Carpenter recently issued a report finding that multiline terrorism reinsurance capacity is about $2.5 billion per program for conventional terrorism and about $1 billion per program for coverages that include NBCR,” stated Lehmann said. “The changes proposed in the House bill are well within the bounds of the private market’s existing capacity, and failing to make those changes would put taxpayers on the line for risks that should be borne by big corporations, property owners and insurance companies,” he continued.

NARAB is not a worry for most, although it slightly short of the “love fest” that one confident NAIC official once testified in the Senate it would be in March 2013.
Sen. Tom Coburn,R-Ok., who was one of the 4 Senate “Nay” votes, threatened to hold up Senate vote of the TRIA bill unless concessions were made on NARAB so a “sunset” of NARAB of two years after the first agent or broker receives a license from the clearinghouse was added to the Senate version. No such sunset exists in the House TRIA legislation to which NARAB is attached, sources noted.

The insurance industry will push for the elimination of the NARAB  sunset provision.

The NAIC noted, “while we have long supported the NARAB legislation, we do however have concerns with the inclusion of a sunset provision that could have adverse effects on insurance markets if NARAB were to come into existence and then ultimately be terminated.”

But,  as expected, most do want NARAB now to see the light of day and must pin their hopes on a  succsessful House and  Senate TRIA package.
U.S. Sens. Jon Tester, D-Mont., and Mike Johanns, R-Neb., stated today that the NARAB legislation is expected to lower prices through increased competition because insurance brokers can more easily register across state lines. It was added to a bill reauthorizing the federal backstop for insurance coverage for terrorist attacks.
Tester said, “This is a big step forward to create new opportunities for small agents and brokers and to provide consumers with a better product at a lower price. Streamlining the licensing of registered agents and brokers while maintaining state regulation of the insurance industry will increase competition and better protect consumers”
CIAB, which has been championing a clearinghouse for agents and brokers for many years, may finally see its work come to fruition if the TRIA bill gets past the remaining stumbling blocks.
“We are pleased that the legislation also includes our long-sought NARAB proposal to create a uniform agent/broker nonresident licensure clearinghouse,” said CIAB’s Wood.
“NARAB II is common sense legislation that creates a streamlined agent and broker licensing system that strengthens the competitive insurance market and protects consumers,” PCI’s Wienecke stated.
The Administration/Treasury also backs NARAB.

TRIA renewal bill not yet whipped and sawed by House

The Terrorism Risk Insurance Act (TRIA) could get a vote Thursday in the Senate as well as the House, although most say that division and discontent, as has been reported, could move the vote until next week.
No one yet is “feeling lucky.”
The Speaker’s office, when contacted early this afternoon said a vote was scheduled Thursday for H.R. 4871, but that is likely premature–observers and staffers say the 218 votes aren’t there yet for the bill that passed out of the House Financial Services Committee under Chairman Jeb Hensarling, R-Tx,  a month ago.

At best, they’ll get the GOP whip count Thursday, and that will determine whether–and then, when–the majority might schedule the vote, said one person familiar with the Leadership’s routine.

“No way,” said another regarding any vote in the Hosue on TRIA this week.

Majority Whip Kevin McCarthy, R-Calif.’s office said there was nothing on the schedule for TRIA as of yet.

In the meantime, where the two versions will meet in terms of their provisions for the program’s extension and trigger threshold is still an open question.

It would bifurcate nuclear, biological, chemical or radiological (NBCR) attack coverage from losses incurred from an attack using conventional (or non-NBCR) materials. In the House bill, which many insurers cannot stomach as-is, the trigger would increase incrementally from $100 million in calendar year 2015 to $500 million in calendar year 2019.
The Senate bill is a seven-year extension maintains the trigger at $100 million and increases the recoupment amount over five years by $10 billion. For more details, see <a href=”http://www.carriermanagement.com/news/2014/06/13/hr4871 CBO score” target=”_blank”>article:
H.R. 4871 would extend TRIA for five years, through Dec. 31, 2019.
The Congressional Budget Office (CBO)  has scored H.R. 4871, estimating that enacting H.R. 4871 would increase budget deficits by about $500 million over the 2015-2024 period. Changes in federal revenues and spending, however, would continue beyond 2024.
Enacting the renewal legislation would lead to additional spending of $250 million and additional revenues of $1 billion after 2024,the CBO estimates. Thus the estimated net budgetary savings after 2024 would be slightly larger than the estimated net budgetary cost between 2015 and 2024, the CBO stated July 15th. The CBO factored in the proposed National Association of Registered Agents and Brokers (NARAB II) reform, as well.
The CBO estimates that after taking into account all revenues and direct spending, enacting H.R. 4871 would lead to a small reduction in deficits over time.
At the same time, the establishment of NARAB, which is to be attached to the House and Senate TRIA bills during a vote now, is facing a sunset provision two years after the first license is issued in a floor amendment added by Sen. Tom Coburn, Md., R-Ok.
Some say it could have been worse and that NARAB otherwise has very strong, bipartisan, bicameral support.
According to one source, Senate supporters of NARAB and TRIA reached an agreement with Coburn where he would agree to a two-year sunset of NARAB – two years after the first NARAB license is issued to an individual after some back and forth on the clearinghouse provision.

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