TERRORISM RISK INSURANCE - January 16, 2015 Roundtable Weekly

Six-Year TRIA Renewal Becomes Law After President’s Signature and Overwhelming Bipartisan Passage by House and Senate  

President Obama on late Monday signed into law a six-year renewal of the federal terrorism risk insurance program, after both the House and Senate acted swiftly last week to pass the Terrorism Risk Insurance Program Reauthorization Act of 2015 (H.R. 26).  Importantly, the TRIA reinstatement was the first public law of the new Congress (Public Law No: 114-1).

Obama Signs into Law Oval Office

President Obama on January 12, 2015 signed into law a six-year renewal of the federal terrorism risk insurance program.

As the federal program expired on December 31 due to a lack of agreement during the Lame Duck session, renewal became a priority for the 114th Congress. On January 7, the House passed H.R. 26 by 416-5; the next day, the Senate passed the legislation by 93-4.  The President signed the bill despite the Administration's stated objections to a rider that makes changes to the 2010 Dodd-Frank Act, providing an exemption for end-users under derivatives rules. 

Roundtable President and CEO Jeffrey DeBoer commented on the enactment of the Terrorism Risk Insurance Act (TRIA) renewal, noting that, “"America's businesses can once again focus on productive ways to build on the economic recovery now underway and create even more private sector jobs. TRIA will not stop terrorists.  It does allow all businesses of all types across the nation to secure the insurance and financing that is necessary to expand." 

The law reforms the terrorism insurance program by:

increasing private-sector co-pays to 80-20% (up from 85-15%); 

gradually increasing the aggregate threshold at which government support becomes available (from $100 million to $200 million);  

increasing the amount that must be recouped by the federal government to $37.5 billion  

authorizing a study on bifurcation of the program, focused on conventional vs. “NBCR” (nuclear, biological, chemical, radiological) attacks

 TRIA as amended x200 - cover image    

Red-line of H.R. 26 as enacted on January 12, 2015 — from Arnold & Porter.

The bill also includes a provision exempting commercial companies from having to post margin on their hedging transactions. Real estate firms employ derivatives to hedge against fluctuations in currency and interest rates; not to speculate. By eliminating costly margin requirements on derivatives for end-users, real estate firms will be able to more cost-effectively manage risk – aiding job creation and investment.

The Roundtable plans to provide comments on a number of provisions in the law that will require additional input, such as:

 Study/rulemaking on certification process 

 Rulemaking on determining marketplace retention amount for year 6 (recoupment) 

GAO study on upfront premiums and capital reserve fund

Annual study on small insurer competitiveness

Reference links from Arnold & Porter:

  TRIA Side-by-Side legislative comparison (.pdf download)

  Red-line of H.R. 26 as enacted on January 12, 2015 (.pdf download)

The Roundtable is grateful for the dedication and hard work of its individual members to achieve a TRIA renewal until the end of 2020 by working with congressional allies and the multi-industry Coalition To Insure Against Terrorism (CIAT).  (Roundtable Weekly, Jan. 9)

With a new Congress in session and the President’s State of the Union address on January 20, The Roundtable will pivot its focus to a full 2015 Policy Agenda, which will be discussed with all Roundtable members at our State of the Industry Meeting on January 27-28 in Washington, DC.

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