S 2244 Introduced – Terrorism Insurance

As I noted in an earlier post, Sen. Schumer (D,NY) introduced S 2244, the Terrorism Risk Insurance Program Reauthorization Act of 2014, which would reauthorize the program under 15 USC 6701 Note.  This is the fourth bill introduced during this Congress that would extend this program that is currently scheduled to end at the end of the year.

Background

According to the ‘Findings’ section of the bill the TRIA was designed to “to establish a temporary Federal program that provides for a transparent system of shared public and private compensation for insured losses resulting from acts of terrorism” {§101(b)}. The program was re-authorized in 2005 (PL 109-144) and 2007 (PL110-160).

As with just about anything dealing with the insurance industry, the various provisions of this program are filled with jargon that is hard to understand by us mere mortals. Suffice it to say, the program is supposed to insure that the Federal government is responsible for ensuring that various insurance policies pay off as advertised in the event of a terrorist attack. It was thought at the time of the original crafting of this measure that the industry was not prepared for serious terrorist attacks on the scale seen in 2001 and that it would need assistance for any attacks during an interim period while it built up the necessary reserves to be able to pay off on claims resulting from a terrorist attack.

Comparison of Current Bills

This table provides a listing of the major provisions of the bill. It shows various dates in the program that the bills extend.

	Current	HR 508	HR 1945	HR 2146	S 2244
§102(11)(G)	2014	2019	2024	2024	Removes Dates
§103(e)(7)(E)(i)(III)	2017	2024	2024	2027	2024
§108(a)	2014	2019	2024	2024	2021
§108(e)(2)	2013		2013, 2017 2020, and 2023	2013, 2017 2020, and 2023

Moving Forward

There is no telling which if any of these bills will actually be considered by Congress. To date there has not been any committee action on any of the bills. HR 2146 does have the largest number of co-sponsors and it does have some fairly substantial bipartisan support. But there is a substantial amount of conservative Republican opposition to the program. I would bet that this is one of those types of legislation that largely gets settled out of the public eye and gets slipped through attached to something more important.

HR 2146 Introduced – Terrorism Insurance

As I noted in an earlier blog post, Rep. Capuano (D,MA) introduced HR 2146, the Terrorism Risk Insurance Program Reauthorization Act of 2013. This is the third bill introduced this session that would extend the Terrorism Risk Insurance Act (TRIA) of 2002 (15 U.S.C. 6701 note). The earlier bills were HR 508 and HR 1945.

Comparison of Bills

All three of the bills would modify the dates for:

• Additional Program Years {§102(11)(G)};

• Timing Of Mandatory Recoupment {§103(e)(7)(E)(i)(III)}; and

• Termination Date {§108(a)}

Additionally, two of the bills (HR 1945 and HR 2146) would also modify Ongoing Reports Regarding Market Conditions For Terrorism Risk Insurance {§108(e)(2)}. The table below shows the date in the current law that would be changed and what change each bill would make.

	Current	HR 508	HR 1945	HR 2146
§102(11)(G)	2014	2019	2024	2024
§103(e)(7)(E)(i)(III)	2017	2024	2024	2027
§108(a)	2014	2019	2024	2024
§108(e)(2)	2013		2013, 2017 2020, and 2023	2013, 2017 2020, and 2023

Problems

The current bill corrects one of the problems that I noted in HR 1945. It changed the timing of the mandatory recoupment of premium until three years after the date of the last potentially covered terrorist attack. The language in HR 1945 could potentially have required the recoupment of premiums before monies were actually paid out for an attack that occurred in 2024.

This bill has the same problem at the previous two bills in that it does not provide for any intermediate recoupment dates for any terrorist attacks that occur between 2012 and the new termination date. The table below shows how the current language provides for intermediate recoupment dates

For terrorist attacks	Recoupment Date
Before 12-31-10	9-30-12
01-01-11 to 12-31-11	9-30-12 Partial 9-30-17 Remainder
After 01-01-12	9-30-17

A staggered recoupment period for the out years could be structured like this:

• Attacks in 2013 and 2014 would have funds recouped by 2017;

• Attacks in 2015 and 2016 would have funds recouped by 2019;

• Attacks in 2017 and 2018 would have funds recouped by 2021;

• Attacks in 2019 and 2020 would have funds recouped by 2023;

• Attacks in 2021 and 2022 would have funds recouped by 2025; and

• Attacks in 2023 and 2024 would have funds recouped by 2027.

Moving Forward

Of the three bills currently dealing with an extension of TRIA, it still looks like HR 508 will have the best chance to move forward through the legislative process. It has 41 sponsors (vs 20 for this bill) and HR 508 has more bipartisan support, looking at the affiliation of the sponsors. I don’t think that there would be any significant opposition to this bill in a floor vote in either chamber. I am a little surprised that there hasn’t been a hearing before the House Financial Services Committee on HR 508 yet.

Bills Introduced – 05-23-13

With the Memorial Day Recess coming up there was a typical surge in the number of bills introduced yesterday. Of that large number of bills two will probably be of interest to the chemical security and cybersecurity communities. They are:

S 1034 Latest Title: A bill to authorize appropriations for fiscal year 2014 for military activities of the Department of Defense and for military construction, to prescribe military personnel strengths for such fiscal year, and for other purposes. Sponsor: Sen Levin, Carl (D,MI)

HR 2146 Latest Title: To extend the Terrorism Risk Insurance Program of the Department of the Treasury for 10 years. Sponsor: Rep Capuano, Michael E. (D,MA)

The military spending bill may provide cybersecurity language. It will be interesting to see if the latest terrorism insurance extension bill (this one with a large number of bipartisan co-sponsers) corrects the deficiencies I’ve noted in the two earlier bills.

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 1^st, 2012 {§103(e)(7)(E)(i)(III)} extends the date for the government to collect premiums from September 30^th, 2017 to September 30^th, 2024; and

• Changes the termination date of the program {§108(a)} from December 31^st, 2014 to December 31^st, 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 1^st, 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.

Terrorism Risk Insurance Extension

I noted almost a week ago that Rep. Grimm (R,NY) introduced HR 508, the Terrorism Risk Insurance Act of 2002 Reauthorization Act of 2013 (further shortened to TRIA Reauthorization Act of 2013). It has taken a week for the GPO to post this proposed legislation on-line and I can’t figure out what took so long.

What the Bill Says

This is a very short bill. Section 1 provides the short titles and §2 modified three dates in the Terrorism Risk Insurance Act (15 USC 6701 note):

• In the definition of ‘Program Year’ {§102(11)(G)} it changes the last program year from 2014 to 2019;

• In the discussion of insured loss shared compensation and the recoupment of the Federal share for an attack that occurs after January 1^st, 2012 {§103(e)(7)(E)(i)(III)} extends the date for the government to collect premiums from September 30^th, 2017 to September 30^th, 2024; and

• Changes the termination date of the program {§108(a)} from December 31^st, 2014 to December 31^st, 2019.

No other changes are made in the TRIA.

An Oddity

While this is a very simple bill it seems that Grimm’s staff (or perhaps the staff of the Financial Services Committee, upon which Grimm serves) has made a very simple yet costly mistake in their crafting of the second change described above.

In 2007 when Congress last reauthorized the TRIA (PL 110-160) they added the provision providing a time line for the Secretary of the Treasury to recoup any federal payouts to support insurance payments to be made to victims of terrorist attacks under §103(e)(7)(C). That schedule provided that:

• For attacks made before 12-31-10, the mandatory collections were required to be made by 9-30-12 {§103(e)(7)(E)(i)(I)};

• For attacks between 1-1-11 and 12-31-11, the collections were to be completed by 9-30-17 with 35% being recouped by 9-30-12 {§103(e)(7)(E)(i)(II)}; and

• For attacks after 1-1-12 until the program termination date on 12-31-14, the collections were to be completed by 9-30-17 {§103(e)(7)(E)(i)(III)}.

It was this last date that would be changed by this bill, effective extending the re-payment period by seven years until 2024. In keeping with the intent of recouping the government’s costs in a timely manner as envisioned by the 2007 re-authorization the extension to 2024 should have been made in stages; for example:

• Attacks in 2015 and 2016 would have funds recouped by 2018;

• Attacks in 2017 and 2018 would have funds recouped by 2020; and

• Attacks in 2019 would have funds recouped by 2022.

Of course that is asking for consistency in legislation and that is a bit far-fetched for Congress. Oh well, I suppose that I should just be happy that they are considering the extension of the current program almost two full years before it expires.

Now we’ll just have to wait to see how long it takes for this bill to be considered.