House chair promises TRIA renewal by next month, but doubts linger

Rep. Neugebauer says his committee will have a TRIA renewal ready, but industry leaders are wary over the bill’s language.

Construction & Engineering


A renewal of the Terrorism Risk Insurance Act (TRIA) may be coming sooner than many in the industry expect.

The leader of the vital house Subcommittee on Housing and Insurance, Rep. Randy Neugebauer, announced this week that he expects a new version of the federal backstop program to be unveiled in June, though cautioning that “it doesn’t always go on schedule.”

“Just to let you know, we are working very hard on this issue,” Neugebauer said Tuesday. “Our goal is sometime in June to put out a bipartisan bill on TRIA, out of this committee, and put it in the hands of the leadership and look at passing it on the House Floor.”

TRIA, initially passed after the September 11 terrorist attacks, is set to expire on Dec. 31, 2014. The program has already been renewed twice, and many in the Republican contingent of the House subcommittee question its continued usefulness.

As a compromise, some members of Congress have proposed new limits to the program. For example, a proposal from Sen. Chuck Schumer would increase insurers’ copay from 15% to 20%, and the mandatory recoupment threshold to $37.5 billion—up from $27.5 billion.

The proposal is already sowing doubts in the minds of people in the insurance industry. Larry Mirel, a partner at Nelson Levine de Luca & Hamilton, worries over insurers’ ability to charge reasonable premiums for terrorism cover while coping with the new threshold and copay.

“If the government doesn’t come in until damages reach $37.5 billion, then insurers have to calculate major terrorism events, come up with more money, put aside more capital and charge more,” Mirel told Insurance Business. “That’s a hefty increase.”

Lines like workers’ comp are especially at risk because, unlike other lines of insurance, workers’ comp does not exclude any particular cause. No peril can be excluded—including terrorism.

“Depending on the nature of the attack, you could have one insured suffering huge amounts of workers’ comp exposure,” Mirel said, noting that companies with workers in urban areas may experience the most severe rate increases.

Most of all, Mirel worries about the timeline of congressional passage of the program.

“This is the third time it’s come up for renewals and each time, the program has only been renewed at the last minute,” Mirel said. “This time it’s going to be the same. There will be no agreement and in the meantime, insurers are having to sell insurance that covers 2015 and beyond.”

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