FIO Focus, Issue No. 34
Terrorism Risk Insurance Program Legislation
Devoted to exploring the progress of the modernization of the insurance industry, FIO Focus provides information and insights about the organizations and issues that are driving change and influencing the future of the industry.
Terrorism Risk Insurance Program Renewal Legislation
Under the Dodd-Frank Act, the Federal Insurance Office (FIO) Director is tasked with assisting the U.S Secretary of Treasury in administering the Terrorism Risk Insurance Program. The Terrorism Risk Insurance Program was originally established by the Terrorism Risk Insurance Act (TRIA) of 2002. The current authorization for TRIA is scheduled to expire on December 31, 2014. This year, three bills have been introduced into Congress to extend TRIA.
H.R. 508, the “Terrorism Risk Insurance Act of 2002 Reauthorization Act of 2013,” was introduced by Rep. Michael Grimm (R-NY) on February 5, 2013. The bill would extend TRIA through 2019 and changes the date for recoupment of any TRIA assistance from 2017 to 2024.
H.R. 2146, a bill “To extend the Terrorism Risk Insurance Program of the Department of the Treasury for 10 years” was introduced by Rep. Michael E. Capuano (D-Mass.) on May 23, 2013, and would extend TRIA through 2024. The bill changes the date for the recoupment of any assistance provided under TRIA from 2017 to 2024. It would also require the President’s Working Group on Financial Markets (PWGFM) issue reports regarding the long-term availability and affordability of insurance for terrorism risk in 2017, 2020 and 2023. The reports would be drafted in consultation with the National Association of Insurance Commissioners (NAIC), and representatives of the insurance industry, securities industry and policyholders.
H.R. 1945, “The Fostering Resilience to Terrorism Act of 2013” was introduced by Rep. Bennie Thompson (D-Miss). This bill would extend TRIA for ten years. It would transfer the responsibility for certifying an “act of terrorism” from the Secretary of Treasury to the Secretary of Homeland Security. The bill changes the date for the recoupment of any assistance provided through TRIA from 2017 to 2024. The legislation would also require the PWGFM to issue reports regarding the long-term availability and affordability of insurance for terrorism risk in 2017, 2020 and 2023.
H.R. 1945 contains a provision that would require the Secretary of Homeland Security to provide insureds with “timely homeland security information, including terrorism risk information, at the appropriate classification level and information on best practices to foster resilience to an act of terrorism.’’ The Secretary of Homeland Security is to prepare a report on the extent to which insureds, particularly those insuring critical infrastructure sectors, are incorporating the information provided by the Secretary of Homeland Security into their business operations.
Reports on the Availability and Affordability of Terrorism Risk Insurance
The 2005 and 2007 TRIA reauthorizations tasked the PWGFM with issuing reports on the long-term availability and affordability of insurance for terrorism risk in 2006, 2010 and 2013. The PWGFM is made up of the Secretary of Treasury and the Chairpersons of the Board of Governors of the Federal Reserve System, Securities and Exchange Commission and Commodities Futures Trading Commission. FIO has been tasked with drafting the 2013 report.
Fifth Meeting of the Federal Advisory Committee on Insurance Set for June 12
The Federal Advisory Committee on Insurance (FACI) will hold its fifth meeting on June 12, 2013, at the U.S. Department of the Treasury in Washington, DC. According to the meeting notice in the Federal Register, the FACI will “receive a report from the Hurricane Sandy Rebuilding Task Force; discuss the impact of global demographics on the insurance industry; receive a report on regulatory developments relating to reinsurance captives; and updates from its subcommittees.” The public was invited to submit comments to the FACI.
U.S.-EU Free Trade Agreement Negotiations
On March 20, 2013, the Office of the United States Trade Representative (USTR) notified Congress that it was entering into negotiations with the EU for a Transatlantic Trade and Investment Partnership (TTIP) agreement. In an April 1, 2013, Federal Register notice published by USTR, a request was made for public comments on the proposed TTIP to assist the USTR in understanding U.S. interests and priorities in order to develop negotiating positions. The USTR also held public hearings on May 29 and 30, 2013. A summary of the comments submitted by the insurance industry is below.
- The EU-U.S. Insurance Dialogue Project should be used by the TTIP to resolve insurance regulatory issues that exist between the U.S. and EU.
- The U.S. and EU should work together to develop “globally relevant” principles to address market distortion by state-owned insurance enterprises.
- Special attention should be paid to the EU’s emerging General Data Privacy Regulation and the potential for those regulations to disrupt the insurance market.
- The TTIP should establish resolution procedures for investor-state disputes. Dispute settlement proceedings should be open to the public, conducted on the record and include participation by interested parties.
- The TTIP should work to foster greater cooperation and coordination between EU and U.S. regulators, leading towards mutual recognition.
- U.S. and EU regulators should develop new tools that include a trigger, methodology and a transparent process for reviewing regulations that are deemed important to the transatlantic economy.
- U.S. and EU legislators should develop political mechanisms to review regulatory cooperation efforts.
- The TTIP should be viewed in the context of global discussions related to insurance regulation.