TRIA renewal leads recent federal activity

TRIRA (HR 2761) 

The Terrorism Risk Insurance Program Reauthorization Act of 2007 (TRIRA) was signed into law and became effective in late December. New provisions in the TRIA program include: 

• The program was extended for seven years. 

• The distinction between domestic vs. foreign terrorism was eliminated. The Treasury Secretary is still required to determine if an event is a covered act of terrorism. 

• A new “hard cap” of $100 billion was created along with a new disclosure requirement which includes notification of some of the changes made in the program. 

• The recoupment process through the application of policyholder surcharges was accelerated. 

While the extension legislation does not mandate an offer of NBCR coverage, the issue has not been eliminated.  HR 4721, the Terrorism Risk Insurance Improvement Act of 2007 (TRIIA), has already been introduced in the House. This legislation is a program trigger and deductible reset bill that could potentially serve as a vehicle for any recommendation of the GAO study to include NCBR as mandate of the program. NAPSLO continues to object to TRIA due to the mandatory offer provision. 

The Nonadmitted & Reinsurance Reform Act (HR1065/S 929) 

While there has been a great deal of contact by with Senate staff and members in recent months regarding HR 1065/S 929, there has been little movement in the bill. The current Congress offers the best chance of enacting this legislation. Should it not pass by December 31, 2008 and the end of this Congress, it his unlikely that it would be viewed in the 110th Congress by either the House or Senate as non-controversial. This could create strong obstacles to its passage. 

 The Insurance Competition Act (S 618 & HR108) The retirement of Sen. Trent Lott (R-Miss.) has raised speculation that the Insurance Competition Act which would “gut” the McCarran/Ferguson Act may be dead, but its two other co-sponsors, Sen. Patrick Leahy (D-VT) and Sen. Arlen Specter (R-PA.) remain active and powerful Senators with Sen. Leahy being the Chair of the Senate Judiciary Committee and Sen. Specter the Ranking Member.  Should these Senators actively take up this bill, it could gain new life. 

The National Insurance Act (OFC) (HR 3200 & S40) 

The legislation was introduced in the House and Senate and referred to the Senate Banking Committee and the House Financial Services Committee and was discussed at a hearing this summer held by the House Subcommittee on Capital Markets, Insurance and Government Sponsored Entitites on insurance regulatory reform. 

S 40/HR 3200 are largely the same as the previous versions introduced in 2006 with the significant exception that reference to surplus lines/non-admitted insurance has been included in the new versions.  Unfortunately, the drafters did not use the surplus lines/non-admitted insurance language that NAPSLO suggested.  The language used allows placement with any non-admitted company  (whether or not the company is an eligible surplus lines company) by a producer using a national license.  This language is neither surplus lines nor wholesaler friendly.    

HR 3200 contains a few differences from S 40, none of which appear meaningful to NAPSLO members. For broker members, a significant issue is the deficient surplus lines language that exists in HR 3200 / S 40 including the failure to address the efficient tax remittance and compliance issues, with no recognition of a single jurisdiction tax remittance or regulation of a multi-state surplus lines transaction, as contained in HR 1065/S 929. 

For company members, the legislation holds many challenges some of which may not yet be clear. There is no provision in either Bill for streamlining surplus lines insurer eligibility, nor is there a provision for an exempt commercial policyholder. However, there is a provision in both versions that allows a holding company to own both state and national chartered companies including a surplus lines company. 

Finally, it must be emphasized that the new surplus line/ non-admitted language makes no distinction between a qualified/ eligible surplus lines insurer and any non-admitted insurer giving those producers holding the federal producers license the right to do business with any non-admitted insurer whether it is an eligible surplus lines insurer or not. This not only diminishes the value of surplus lines eligibility, but also undercuts the wholesale insurance distribution system. 

Federal Catastrophe Legislative Initiatives 

Several federal catastrophe Legislative initiatives are in the works including,  HR 3121 & S 2284 - Flood Insurance & Modernization Act was passed the House last year and included an expansion to include wind. It was then sent to the Senate Banking Committee which removed the expansion of the program to include wind coverage. The bill awaits fi nal action. HR 3355 & S 2310 - Homeowners Defense Act: passed by House and referred to Senate Banking Committee. The bill creates a voluntary consortium to pool catastrophic risk and authorizes the Federal Government to provide liquidity and loans to state catastrophe insurance programs. Others include HR 91 - Homeowners Insurance Protection Act; HR 330 - Homeowners Insurance Availability Act; HR 164 - Policyholder Disaster Protection Act; and S 2327 - Homeowners’ Insurance Assistance Act.