United States: House Republicans Propose Three Year TRIA Reauthorization And Reduced Federal Role

On May 1, the Chairman of the US House Financial Services Subcommittee on Housing and Insurance, Rep. Randy Neugebauer (R-TX), gave committee Republicans a draft proposal outline, since publicly circulated by media, describing the concepts and terms under which he is prepared to reauthorize the Terrorism Risk Insurance Act (TRIA). Chairman Neugebauer released only this draft outline and has not yet circulated proposed bill language, although many expect such language to be introduced within the next two weeks.

The proposal, entitled The Terrorism Risk Insurance Modernization Act of 2014 (TRIM), has the support of House Financial Services Chairman Jeb Hensarling (R-TX) and is said also to have the support of key members of the House Republican leadership, including Majority Leader Eric Cantor (R-VA). The outline proposes a three year reauthorization of TRIA, which is set to expire on December 31, 2014, and other changes to the current program including increasing the trigger limit and reducing the annual government assistance cap. The most significant change would provide different levels of federal coverage for nuclear, biological, chemical and radiological (NBCR) terrorist acts than for non-NBCR terrorist acts. The proposal also would establish a capital reserve fund with premiums collected by insurers. Thus, the House Republican proposal would represent a significant change in approach from prior TRIA reauthorizations that largely extended the duration of the then existing TRIA program without making significant changes to the program's terms.

The House Republican committee draft comes two weeks after Senator Charles Schumer (D-NY), with the bipartisan support of eight other senators, introduced a bill (S. 2244) that would extend the current TRIA program for an additional seven years through December 31, 2021, increase the aggregate retention amount by $2 billion per year from the current level of $27.5 billion until it reaches $37.5 billion and otherwise essentially extend the current TRIA program. The House Republican outline already has been sharply criticized by Financial Services Committee Ranking Member Maxine Waters (D-CA) and other Democrats who want to see the current TRIA program extended without delay for a term of anywhere from seven to ten years.

Chairman Hensarling has repeatedly expressed his intent to scale back TRIA and 'facilitate a transition to a viable market for private terrorism risk insurance.' Notwithstanding the skepticism of Chairman Hensarling and a number of other House Republicans about the wisdom and advisability of reauthorizing TRIA and their assertions that the program's continuation has had the effect of preventing the private sector from assuming responsibility for insuring against the risks of terrorism, the outline's release is a clear acknowledgement by the House Republican leadership that TRIA needs to be reauthorized in some form for at least for some period.

The timing of the outline's release also reflects a recognition of the need for both the House and Senate to move forward promptly on passing their respective versions of TRIA reauthorization bills to allow adequate time for the likely differences to be reconciled in a conference committee if the Congress is to pass and the President sign a TRIA reauthorization before TRIA expires at the end of this year. To that end, many expect the Financial Services Committee to mark up its version of a TRIA reauthorization bill as early as the last week in May, or when the House comes back into session the second week of June. The leadership of the Senate Banking Committee has indicated its intention to mark up its version of a TRIA reauthorization bill soon after it completes its markup of the Johnson-Crapo GSE reform bill.

Thus, with the outline's release, the question of whether House Republicans will agree to reauthorize TRIA seems to have been resolved. The debate will now shift solely to questions of the length of a TRIA reauthorization and the terms under which the program will be reauthorized.

Draft Outline Overview

  • A three year program extension through December 31, 2017.
  • Changes the terrorist act certification process and the timeline for making such certifications.
  • Allows a voluntary small insurer opt-out of TRIA coverage.
  • Changes the aggregate retention amount to be equal to the sum of the insurer deductibles for the preceding program year for all participating insurers beginning in 2016.
  • Changes the rate of recoupment of taxpayer funds from 133 percent to 150 percent beginning in 2016.
  • Reduces the annual liability program cap beginning in 2017 to $75 billion, from $100 billion.
  • Provides different levels of insurance coverage for NBCR and Non-NBCR terrorist attacks.

For NBCR certified acts

  • Retain the federal copayment share of 85 percent insured losses after the trigger and an insurer's deductible have been met.
  • The program trigger of $100 million per year before federal payments occur would remain in place.

For Non-NBCR events

  • There is a decreased copayment share of 80 percent of insured losses beginning in 2016 and an additional decrease to 75 percent beginning in 2017.
  • The program trigger would increase from $100 million to $250 million in 2016 and increase to $500 million in 2017.
  • Establishes a capital reserve fund, known as the Terrorism Reserve Fund (TRF), which would hold funds in a fiduciary capacity on behalf of the Treasury Secretary.
  • The TRF would be funded with 50 percent of the premiums collected and attributed to terrorism risk insurance coverage
  • The fund may be used by participating insurers to pay:

    1. Deductibles under TRIA;
    2. The insurer's losses not covered by the deductible;
    3. Any amounts recovered under recoupment; and
    4. The cost of risk-sharing mechanisms to reduce insurer and taxpayer exposure.
  • Participating insurers would be authorized to invest funds in certain permissible activities.
  • In the event of TRIA's termination, 90 percent of the funds would be returned to the insurer.

See below for a chart comparing key aspects of current law to the Schumer bill (S. 2244) and the House Republican Draft Outline

Terrorism Risk Insurance Program Reauthorization - Comparison of Current Law to the Schumer bill (S.2244) and the House Republican Draft Outline

Current Law (P.L. 110-160) Senator Schumer's bill (S.2244) House Republican Draft Outline (TBA)
Title Terrorism Risk Insurance Program Reauthorization Act of 2007 Terrorism Risk Insurance Program Reauthorization Act of 2014 The Terrorism Risk Insurance Modernization Act of 2014
Length of Reauthorization 7 years through Dec. 31, 2014 7 years through Dec. 31, 2021 3 years through Dec. 31, 2017
Mandatory Recoupment Rate 133 percent No change from current law Increases to 150 percent
Recoupment Time Period 3 years until Sept. 30, 2017 7 years until Sept. 30, 2024 Not addressed
Insured Loss Shared Compensation 85 percent-15 percent split with the federal government Insurers' share increases to 80-20 percent (an increase of one percent per year over 5 years from the current level) NBCR 85-15; Non-NBCR 80-20 (starting in 2016) and 75-25 (starting in 2017)
Program Trigger $100 million per year No change from current law NBCR events $100 million; Non-NBCR $250 million (2016); and $500 million (2017)
Annual Cap on Assistance $100 billion per year No change from current law $75 billion beginning 1/1/2017
Aggregate Retention Amount $27.5 billion through 2014 Increases amount by $2 billion each year until it reaches $37.5 billion Beginning in 2016, the insurance marketplace retention amount to equal the sum of the insurer deductibles for the preceding program year for all participating insurers
"Act of Terrorism" Definition For an act of terrorism to be covered under TRIA, it must be a violent act committed in an effort to coerce the U.S. civilian population or influence U.S. government policy. It must have resulted in damage within the United States or to a U.S. airliner or mission abroad. To qualify as a covered "terrorist act", it must be certified by the Secretary of the Treasury in concurrence with the Attorney General and Secretary of State. No change from current law Adds back previous language requiring that a covered act of terrorism be committed on behalf of a foreign person or foreign interest.
Certification An individual act of terrorism must be certified by the Secretary of the Treasury in concurrence with the Attorney General and Secretary of State. No change from current law To certify an "act of terrorism," the Treasury Secretary must consult with the Attorney General and the Secretary of Homeland Security (replacing the Secretary of State under the current law). Removes the current $5 million threshold for certifying acts of terror. Establishes a fixed, 90-day timeline for which the Treasury Secretary is to determine whether to certify an event as an act of terrorism.
Other Changes or Additions 1. Separate treatement of conventional terrorism from NBCR terrorism

2. Voluntary small insurer opt-out of TRIA coverage

3. Establishes a Capital Reserve Fund (CRF)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
30 Jan 2019, Other, Chicago, United States

Please join us on January 30, 2019, for the Fifth Annual Courageous Counsel Leadership Institute. This year's theme is "Risk and reward: Creating a culture that promotes innovation, change and growth.

 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions