WASHINGTON – The House passed long-sought legislation Wednesday to renew the federal program that props up the private market for insurance against terrorist attacks.
The 416-5 vote revives the government's terrorism risk insurance program, which provides a backstop in which the government steps in to cover the bulk of losses in the event of a major terrorist attack. The guarantee has made private companies more willing to underwrite policies against terrorist attacks.
The legislation had passed the House last month after extensive delays but became snagged in the Senate in the final days of Congress. The Senate is likely to take up the measure shortly.
The legislation would decrease the government's exposure by gradually increasing the "trigger" at which the program starts to cover terrorist attacks to $200 million in losses, up from $100 million previously. The government's share of catastrophic losses would be gradually lowered from 85 percent to 80 percent.
The program was enacted in 2002 after the market for terrorism insurance collapsed in the wake of the 2001 terrorist attacks. It was originally designed to be a temporary program but the hoped-for revival of the private market for terrorism insurance has failed to flourish. The government has never paid out under the law.
The legislation is important to economic sectors such as construction, real estate, hospitality and major sports leagues, which fear crippling insurance costs if the program expires and rates skyrocket — or the market for terrorism insurance collapses altogether.
The measure also includes unrelated legislation that seeks to protect businesses that use financial instruments called derivatives to hedge risk from being subjected to costly margin requirements under Dodd-Frank regulations. Those businesses — including farmers and ranchers, airlines and manufacturers — are already protected under the terms of the law and follow-up regulations, but such "end users" of derivatives are concerned that they could get snared by future regulations.
Another add-on would establish a National Association of Registered Agents and Brokers that would license insurance agents and brokers to operate in multiple states. Insurance is regulated by the states. That provision tripped up the measure in the Senate in December after former Sen. Tom Coburn, R-Okla., objected.