Senate panel clears terrorism insurance extension

The Senate Banking Committee unanimously approved legislation Tuesday that would extend a government backstop for the insurance industry in case of a terrorist attack.

The broad support for the legislation suggests it could quickly advance to the Senate floor for passage. However, the passage of another extension of the program is murkier in the House, as some conservatives gripe about extending another government program that was once intended to be temporary.

{mosads}The seven-year extension to the Terrorism Risk Insurance Act would be the fourth since the program was created after the Sept. 11, 2001, terrorist attacks. Advocates and industry argue providing a backstop for the insurance industry is critical to enabling development in high-risk areas like lower Manhattan.

“In a post 9/11 world … developers embarking on multimillion or billion dollar constructions projects need to know they can insure those investments,” said Sen. Charles Schumer (D-N.Y.), a lead sponsor of the measure. “Without TRIA, they will not be able to and they will not develop.”

They also point out that the latest extension out of the Senate makes a number of tweaks to the program that require insurance companies to shoulder more of the costs if a terrorist attack were to occur.

But skeptics argued that the government is highly unlikely to recoup its costs under the bill, because it requires the industry to pay back the government after an attack via industry-wide assessments.

Sen. Tom Coburn (R-Okla.) said the idea of the government increasing costs on the insurance industry after a massive terrorist attack is a fantasy, and pushed for the costs to be covered by up-front premiums before an attack.

“One should be incredulous of the idea of Congress moving forward with what is essentially a post-terrorism tax,” he said. “We wouldn’t do it. We’d back off.”

Coburn’s amendment to require up-front premiums ultimately failed at the committee, but Sen. Mark Warner (D-Va.) lent his support. And several members offered praise for the change, including Chairman Tim Johnson (D-S.D.).

However, Johnson also cautioned that such a change would result in a significant negative score from the Congressional Budget Office, which would make the bill’s passage much more difficult politically.

“This is a situation where common sense and our CBO rules are pitted against each other,” said Sen. Mike Crapo (R-Idaho), the ranking Republican on the panel. Crapo also voted against Coburn’s amendment.

All senators ultimately backed the bill, clearing the way for consideration by the full Senate.

Meanwhile in the House, a number of extension bills have been introduced, but it is not clear yet how the GOP-led chamber would handle the issue. House Financial Services Committee Chairman Jeb Hensarling (R-Texas) questioned the repeated extensions of the program, but has said he is willing to discuss another.

One challenge for TRIA backers in the House is that one of its loudest GOP advocates was Rep. Michael Grimm (R-N.Y.). Grimm stepped down from his position on the Financial Services Committee as he defends himself against 20 federal criminal counts.