Giles Taylor
Lloyd’s
Viewers of the West Wing will know that legislative machinations in Capitol Hill’s small screen equivalent can move as fast as the dialogue. The prospect that the real thing can match the small screen might be greeted with scepticism. It is true that the pace of the TRIA renewal drama might have dragged. However, the speed with which the programme extension finally passed certainly would have matched the timetable of President Bartlett, the real President’s fictional counterpart.
The recent passage of the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) could have turned out differently. Press reports and updates earlier in the year spoke of the gulf between the Democrat-dominated Congress and the Republican Administration on the subject, with talk of a Presidential veto from the Administration and uncompromising talk from Representative Barney Frank (Democrat, Massachusetts), Chairman of the House Financial Services Committee, about restricting renewal to 120 days if the House’s demands were not met.
Congress divided
The points at issue were considerable, with the House demanding amongst other things a 15-year extension, inclusion of group life insurance, a lowering of the event trigger, and the inclusion of nuclear, biological, chemical and radioactive (NBCR) attacks. The Administration said it would veto any Bill that extended the scope of the TRIA programme, that did not increase private sector retentions, and that was not temporary and short term.
Subsequent debate in both Senate and House led to concessions on both sides around the length of the renewal and around the scope of the programme. Significant differences, with rhetoric to match, remained until the House’s acceptance of the Senate’s Bill on 18 December.
E pluribus unum
Out of these seemingly irreconcilable positions, a consensus emerged. It could be said that the length of the reauthorisation of the TRIA through the passage of the TRIPRA might indicate a broader acceptance of the general principles of the programme. Equally, this sense of not wishing to upset matters by forcing a temporary extension might have been the result of pre-election nervousness. Certainly, difficult debates around the provision of cover for NBCR attacks and the introduction of a reset mechanism for areas hit by terrorism have been shelved by proposing Government Accountability Office (GAO) studies. These will be the cause of frank debate once these issues re-emerge but, for the moment, the insurance industry has the prospect of some stability.
The key measures of TRIPRA are as follows:
Extension of TRIA by a further seven years.
Removal of the distinction between acts of foreign and domestic terrorism, so that domestic terrorism is included in the Terrorism Insurance Program.
Hardening of the cap of insurers’ liability at $100bn by eliminating the phrase ‘until such time as Congress may act otherwise with respect to such losses’.
Modification of the ‘clear and conspicuous disclosure’ requirement to expressly include disclosure of the $100bn aggregate cap to policyholders.
Removal of the US Treasury Secretary’s discretion to delay policyholder surcharges for the mandatory recoupment layer for events occurring during the 2008-2011 period.
Provision for two new studies by the GAO on:
Recommendations for expanding coverage to include nuclear, biological, chemical and radiological risks.
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The possibility of a reset mechanism for locations impacted by terrorist events.
For full details, please consult Crystal or refer to Market Bulletins Y4107 (20 December 2007) and Y4111 (3 January 2008).
Contact
Lloyd's International Trading Advice on +44 (0)20 7327 6677 or LITA@lloyds.com for more information.
