Monday, May 20, 2013

HR 1945 Introduced – Terrorism Insurance Extension

As I noted in an earlier blog post, Rep. Thompson (D,MS) introduced HR 1945, the  Fostering Resilience to Terrorism Act of 2013. The bill would extend the operation of the Terrorism Risk Insurance Act (TRIA, 15 USC 6701 note) until 2024. In many ways this bill is similar to HR 508, the TRIA Reauthorization Act of 2013.

Program Extension

The extension of the current terrorism risk insurance program is accomplished by making the following changes to the TRIA:

• In the definition of ‘Program Year’ {§102(11)(G)} it changes the last program year from 2014 to 2024 (HR 508 changes this to 2019);
• In the discussion of insured loss shared compensation and the recoupment of the Federal share for an attack that occurs after January 1st, 2012 {§103(e)(7)(E)(i)(III)} extends the date for the government to collect premiums from September 30th, 2017 to September 30th, 2024; and
• Changes the termination date of the program {§108(a)} from December 31st, 2014 to December 31st, 2024 (HR 508 changes this to 2019).

Recoupment of Federal Costs

Rep. Thompson apparently misunderstands the way the TRIA works even more so than does Rep. Grimm (R,NY). Both of them change the date of the Federal recoupment to 2020 for terrorist attacks conducted after January 1st, 2012. This means that what was originally intended to be a two to three year recoupment period is changed to a 22 year period for attacks that (would have) occurred in 2012. This amendment should have included a sliding scale of attack dates and recoupment dates.

Thompson compounds Grimm’s error by extending all dates to 2024. This means that for terror attacks that took place in later years would have less time for insurance companies to reimburse the federal government for the share of the claims paid for by the federal government. Each year that recoupment time would become smaller and smaller. In 2024 the federal government would be required to recoup all funds that it would pay out in future years for attacks in 2024.

Homeland Security Information

Section 4 of this bill goes further than HR 508 in that it requires the Department of Homeland Security to help increase the resilience to terrorist attack of facilities insured under TRIA. The bill would amend the TRIA (15 USC 6701 Note) by adding §103(j) to require DHS to provide:

• Timely homeland security information, including terrorism risk information, at the appropriate classification level {§103(j)(1)}; and
• Information on best practices to foster resilience to an act of terrorism {§103(j)(2)}.

The bill would also require the Secretary to report to Congress as to how well critical infrastructure organizations were incorporating the information provided by DHS into their business operations. It would be interesting to see how DHS would collect the information necessary to complete that report.

Moving Forward

In a press release, Rep. Thompson said:

“The Boston Marathon bombings last month serve as a stark reminder that terrorism and mass violence remain both a homeland security and economic threat. If TRIA is allowed to expire next year, there may be fewer insurers offering terrorism insurance and prices potentially could increase. By extending this program for 10 years, we will ensure much-needed stability and predictability for the business community.”

The Boston terror attack may provide adequate impetus for the passage of an extension of the TRIA. Grimm’s bill probably has a better chance to get to the floor of the House since it is assigned to only a single committee (the Financial Services Committee) for review while Thompson’s bill also has to go through a review at the Homeland Security Committee. That plus the fact that Grimm is a Republican on the Financial Services Committee makes it more likely that his bill will move forward in that Committee.

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