The House Financial Services Committee has cleared a two-year extension of the federal "backstop" coverage for terrorism-related claims. By voice vote on Sept. 29, the panel approved a measure that would continue the 2002 Terrorism Risk Insurance Act through December 2007.
Under that law, the Treasury covers terrorism-related claims above certain annual thresholds. In 2004, for example, the Treasury would be responsible for 90% of such claims after an insurer's exposure exceeds 10% of its commercial premiums.
The 2002 statute doesn't expire until December 2005, but insurance, real estate and construction groups have been lobbying Congress to extend the law sooner than that. They contend that an early extension would provide the insurance market more certainty. The next step for the legislation would be a House floor vote. There has been no action yet in the Senate. Advocates of the legislation are working against the clock.
Congress is expected to recess in early October and seems likely to return after the Nov. 2 elections for a lame duck session. But any bill that doesn't pass before the 108th Congress ends would die. In that event, the insurance legislation would have to be re-introduced and make its way again through committees and floor votes.
Leigh Ann Pusey, American Insurance Association senior vice president for government affairs, said that "there is a sense of urgency to this bill, because commercial insurance policies taking effect in the early months of 2005 are being negotiated right now. As a result, the negative financial fallout of inaction [on the bill] would be felt very soon."