Terrorism Risk Insurance Program Authorization Act

Floor Speech

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Mr. CRAPO. Mr. President, I am appreciative of Senator Schumer and the work we have been able to do together to move this legislation forward.

I rise today to speak in favor of S. 2244, the Terrorism Risk Insurance Act, or TRIA, program. As a cosponsor of this bill, I recognize Senator Schumer, Senator Kirk, Senator Heller, Senator Reed, and others for helping to put this bipartisan piece of legislation together.

Chairman Johnson and his staff also deserve a great amount of thanks for their strong efforts in moving this bill forward.

Working together, we developed a balanced bipartisan product that was literally unanimously supported in the banking committee 22 to 0. This bill we have put together allows the private insurance industry to absorb and cover the losses of all but the largest acts of terror--ones in which the Federal Government would likely be forced to step in, in any event, if the program were not there. Taxpayer protections have been increased in this reauthorization by moving more of the responsibility for losses on to private insurers.

For those who are not familiar with the program, TRIA was initially passed as a response to the unavailability of terrorism insurance in the wake of 9/11. The private market had already retreated in response to those terrorist attacks. It was then thought that a temporary program would allow the market time to develop products that would allow policyholders to protect themselves from terrorism losses.

More than a decade after the tragic events of 9/11, the temporary inability to insure against terrorism has abated, and private capital is better positioned to take on more exposure to terrorism.

When the banking committee held its first hearing on TRIA's reauthorization last year, we discussed the ability of the private insurance market to step in to provide terrorism insurance if the TRIA Program expired. In that hearing, and in subsequent meetings with providers, policyholders, and stakeholders, we recognized on a bipartisan basis the continued difficulties associated with providing terrorism insurance required that we look again at extending the act.

Terrorism is difficult to predict. Therefore, the ability to develop products to insure against terrorism is very difficult to do. The size, severity, and frequency of attacks are hard to model. Also, attacks may be highly correlated, making it difficult for private insurers to diversify their risks.

Having TRIA in place was determined to be important. But if the market is too heavily reliant on Federal support, we may deter private companies from coming up with cost-effective solutions. That is why, instead of a straight reauthorization, I and others pushed for reforms to maintain the program and increase protections for taxpayers.

In order to do that, we examined each of the policy levers in the program. The bill marked up by the banking committee would increase the insurance industry's aggregate retention level and the company coinsurance levels. As the program stands today, the Federal Government would recoup any TRIA payments it makes up to $27.5 billion through post-event payments. This industry retention level allows the taxpayer to recover TRIA payments through an industrywide assessment on property-casualty policies. This aspect of the bill was last changed in the 2005 reauthorization. The bill before us today increases that recoupment level by $2 billion a year, to an overall level of $37.5 billion--an additional $10 billion. This is a significant reduction in the potential exposure and cost to taxpayers.

In addition, the bill increases the company coinsurance level from 15 percent to 20 percent over 5 years. This means that before the backstop is reached, each company will take on a greater portion of the losses above their deductible.

In order to get more private capital in the marketplace, Senator Flake has an amendment to create an advisory committee to promote the creation and development of private sector risk-sharing mechanisms. I support the addition of the Flake amendment and believe the advisory committee will find private sector solutions that will allow us to further decrease the program in future reauthorizations.

Before I conclude, I have a handful of letters in my possession here from groups across the country strongly supporting and encouraging that we adopt this legislation.

The U.S. Chamber of Commerce has listed this as a key vote. The Coalition to Insure Against Terrorism, which represents dozens and dozens of the financial sector interests across this country, recommends and encourages that we support this legislation, and the Mortgage Bankers Association, the National Association of Insurance Companies, the Property Casualty Insurers, the National Apartment Association, the National Multifamily Housing Council, and the American Builders Conference.

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Mr. CRAPO. Getting terrorism risk insurance right is important in order to protect taxpayers and to limit economic and physical impacts of any future terrorist attacks on the United States. This bill will help us maintain a properly balanced terrorism risk insurance program that increases the Nation's economic resilience to terrorism.

Again, I thank Chairman Johnson and Senators Schumer, Kirk, Reed, and Heller for their partnership in bringing this bill forward and encourage its adoption.

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Mr. CRAPO. Mr. President, I wish to take this opportunity to make comments on a couple of the amendments that have been or will be presented to the bill.

First, with regard to the amendment presented by Senator Flake. As I mentioned in my opening remarks, I support this amendment. One of the issues we deal with in the reauthorization of TRIA each time we face it is the correct balance and the level of government protection and support that needs to be in place to help the market deal with major catastrophic events in the United States and the level of requirement we insist there be from the private sector and how they will step in and deal with these risks on an insurance basis rather than requiring the taxpayers to be the ultimate backstop.

Ultimately our objective should be and must be that the taxpayer be relieved of this kind of burden and that the private sector step in and cover the risks through our private sector insurance markets. I think we have a pretty broad consensus that we are not at the level yet where we can get there, but each time we have reauthorized TRIA, we have moved it closer to that objective, and this legislation itself moves it closer.

As I said in my introductory remarks, we have increased the retention level--in other words, the amount of money the private sector must pay back to the Treasury if the taxpayer is ultimately required to step in and backstop a catastrophic terrorist attack. This legislation will increase that amount by another $10 billion--from $27.5 billion to $37.5 billion. We are also increasing the amount of money which the private sector insurance industry must put up upfront before the government steps in and provides a backstop. We are increasing that from a 15-percent copay to 20-percent copay.

We are taking significant steps in this legislation to get to the ultimate objective of having the private sector fully handle the insurance risk due to a catastrophic terrorist attack.

Senator Flake has provided an amendment, which I support, that would help us create an advisory committee that will focus on this specific issue and help us to find private sector solutions to allow us to further decrease the program in the future reauthorizations. I think this is an incredibly important amendment, and I believe there is strong bipartisan support for it. It allows us to have advice and support from this advisory committee that would be created under his amendment to take further and more important steps toward achieving the ultimate objective of having to be able to eliminate the need for taxpayer involvement in dealing with catastrophic events such as a terrorist attack.

I strongly support the addition of the Flake amendment. I believe the advisory committee he proposes will find private sector solutions which will allow us to further decrease and ultimately eliminate the program in future reauthorizations.

Another amendment that has been discussed on the floor today by Senator Tester of Montana and Senator Johanns of Nebraska is the NARAB amendment, which is an amendment that will be added to this legislation. This is also an important piece of legislation from the banking committee and it is called the National Association of Registered Agents and Brokers, or NARAB. Again, it is a bipartisan piece of legislation that has strong support across the United States in various industries to try to allow our registered agents and brokers to have a more efficient and effective system in which to obtain necessary authorization to conduct their business nationwide.

I am an original cosponsor of this language because it simplifies the process of agent licensing across State lines while preserving the authority of State insurance regulators. This bill has broad support from the insurance community, including the National Association of Insurance Commissioners, the Independent Insurance Agents and Brokers of America, the National Association of Insurance and Financial Advisers, and the Council of Insurance Agents and Brokers.

The creation of NARAB will allow agents and brokers to focus on their responsibilities to their clients and spend less time dealing with redtape. By reducing costs and increasing competition among insurance producers, we will generate lower costs and better service for consumers. Importantly, NARAB II deals specifically with marketplace entry and would not impact the States' jurisdiction over day-to-day authority in the insurance marketplace. This is a very critical point because I believe one of the biggest issues relating to this legislation is preserving and protecting States rights and State jurisdiction with regard to regulation of the insurance marketplace.

Insurance commissioners of the States will be able to better catch bad actors who, after losing a license in one State, move quickly to enter into another State. State regulators will serve on the board of NARAB with the same objectives they have as insurance commissioners--to protect the public interest by promoting the fair and equitable treatment of insurance consumers.

The idea for NARAB is now 14 years old. We have literally been working on it for that long, and I am hoping we can get this legislation across the finish line today.

These are two important amendments that will come forward today with regard to the TRIA legislation, and there are several more. As we move forward today I am hopeful we will make the kind of progress on these important and critical issues that will enable us to not only pass this legislation but to do so with a strong vote here in the Senate and then get us into a conference with the House so we can put this important legislation, which has been developed on a bipartisan basis, on the President's desk.

Far too often we are seeing gridlock in this Chamber. We have two pieces of legislation today where we have a bipartisan agreement and bipartisan support, and I think it is a good day for the Senate to see this kind of legislation moving forward.

I yield the floor.

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Mr. CRAPO. Mr. President, I will just take a moment to speak about Senator Vitter's amendment, which I strongly support.

During Dr. Yellen's nomination hearing, I noted the need to fill additional vacancies at the Federal Reserve Board with individuals bringing balanced viewpoints. The President should nominate someone with community bank experience to the Board to fill at least one of the remaining vacancies.

Community banks play an important role in their local economies and face a disproportionate burden from our existing regulations. We should ensure that the perspective of these banks is represented in policymaking. That is what this amendment does, and I encourage my colleagues to support it.

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Mr. CRAPO. Mr. President, as we near the votes on this bill, I wish to take one more opportunity to speak in favor of the TRIA reauthorization legislation.

Again, I thank Senators SCHUMER, HELLER, and KIRK and their staffs and Senator Reed for all their hard work in bringing forward this legislation.

I also thank Chairman Johnson and his staff for moving forward so quickly and aggressively on this legislation. Together, we were able to put together a bill that allows the program to continue to function while increasing the movement toward ultimate taxpayer protection.

As I mentioned before, we were able to approve this bill out of committee with a 22-to-0 unanimous vote. The agreement of all the members of the banking committee that we should move this bill forward speaks to the importance of this critical legislation and to the level of the added taxpayer protections we were able to build into it.

Our bill increases the level of losses that the private sector will absorb before reaching the Federal backstop. We do that by increasing the coinsurance level of any company participating in TRIA so that each company will shoulder a greater percentage of the losses. We also increase by $10 billion the level of mandatory post-event recoupments to $37.5 billion, which means that the taxpayer will ultimately recover all TRIA losses except in the most extreme events.

This bill will continue a program that reduces our economic vulnerability to terrorism, and I encourage my colleagues to support it.

One last time, I thank Senator Johnson and Senator Schumer for their strong support and for our ability to work together and break the mold, if you will, by having a bipartisan movement forward on this important and critical legislation.

With that, I yield the floor.

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Mr. CRAPO. Mr. President, pursuant to section 904 of the Congressional Budget Act of 1974 and the waiver provisions of applicable budget resolutions, I move to waive all applicable sections of that act and applicable budget resolutions for purposes of the pending amendment, and I ask for the yeas and nays.

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