Congress nears a decision on terrorism insurance

Congress is nearing its decision on the fate of a program that makes many public works projects possible and workers’ comp rates affordable.

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The lame duck Congress is close to reaching a deal on reauthorizing the federal Terrorism Risk Insurance program, though the outcome may not be what industry leaders had anticipated or hoped.

According to a report from The Hill, multiple sources close to lawmakers say the deal would reauthorize the program for six years but double the program trigger to $200 million in damages before the government-backed insurance would kick in.

This measure would represent a compromise between Senate democrats, and House Financial Services Committee Chairman Jeb Hensarling, who has pushed for the trigger to be increased to $500 million.

The news of a potential deal comes just as legislators and industry leaders had begunto pin hopes to a short-term reauthorization, with the issue to be readdressed when Republicans take control of both the House and Senate in January.

With the passage of this version of TRIA reauthorization, the insurance industry can come away with two other victories: the establishment of NARAB, a national registration board for independent agents and brokers, and the correction of a mistake in the 2010 Dodd-Frank Wall Street Reform Law that would stop requiring insurers to follow the same regulatory requirements as banks.

The Hill’s sources said the TRIA bill could be considered as early as next week—just a few days away from the current program’s expiration on the 31st.

Not all in Washington share this optimism, however. The Wall Street Journal reported yesterday that House Republican leadership aides pointed to a short-term extension of the program as a solution for current roadblocks in Congress.

That’s not tenable, industry leaders say, as policies providing protection against terrorism risk run for multiple years.

“A short-term extension would only serve to prolong the uncertainty for US businesses that purchase terrorism coverage,” said American Insurance Association CEO Leigh Ann Pusey.

If a reauthorization is not passed, it would become highly difficult for insurance producers to find affordable policies for many clients, particularly contractors who often carry requirements to purchase terrorism coverage on a project.

Workers’ compensation could also suffer—and has already suffered, according to a May report from Marsh.

“Because insurers cannot exclude terrorism-related losses and employers are required to buy it, the options available to buyers have been reduced and rate increases have accelerated,” the broker said in its analysis.

While some insurers set policy expiration dates to coincide with TRIA’s expiration, others are writing contingencies into policies and may need to rely on manuscript endorsements depending on the outcome in Congress.

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