Reinsurers face tough choices as Tria stumbles
Reinsurers will be forced to make some tough choices and face a last minute panic over the terms and conditions of some contracts that renew on January 1 following the likely failure of the US Senate to pass the Terrorism Risk Insurance Act (Tria) this year.
The renewal of Tria, widely anticipated to be completed this week, was stopped dead in its tracks last night (Tuesday December 16) by the actions of a single Senator in his final political act before retiring.
Republican Tom Coburn from Oklahoma objected to a part of the bill that created a semi-federal licensing programme for insurance agents, permitting them to sell across US state lines. Coburn wanted states to be able to opt out of that programme. He has also previously said that he believes the private market will find a way of covering terrorism risks and he sees Tria as effectively offering the industry a subsidy.
The bill was passed in the House of Representatives last week. Since the House has now left for its break, the bill had to be either accepted as it was or rejected outright. Congress will now need to reintroduce the Bill in both the House and the Senate in the New Year.
Senator Chuck Schumer, who had championed the bill, described the expiration of Tria as a potential economic disaster putting billions of dollars of projects and hundreds of thousands of jobs are at risk. With no terrorism coverage available, some large projects could be put on hold until the situation is resolved.
