On January 12, 2015, President Barack Obama signed into law a bill that will renew the Terrorism Risk Insurance program for six years. The program had been allowed to lapse when the Senate failed to vote to renew it in its final meeting in 2014. Earlier in January 2015, however, the House of Representatives voted 416-5 to renew the Terrorism Risk Insurance Act (“TRIA”) for six years, and on January 8, 2015, the Senate followed the House, voting 93-4 to reauthorize the program.
The Terrorism Risk Insurance program provides a federal insurance backstop for owners of skyscrapers, sports stadiums, shopping malls and large projects that could face terrorism threats.
For the TRIA program to kick in, total losses will have to amount to $200 million over five years. The mandatory recoupment will be $37.5 billion. The total private industry recoupment will be 140% of covered losses.
Lawmakers incorporated a few additional provisions to distinguish this bill from the original TRIA. This bill will not only extend terrorism insurance, but it also amends a provision of the Dodd-Frank Act by creating an exemption for ranchers, energy businesses, and other “end users” of derivatives companies from having to meet extra collateral requirements. Senator Elizabeth Warren offered an amendment that would remove this change to the Dodd-Frank Act from the TRIA bill, but her amendment did not get enough votes. Therefore, the exemptions from certain Dodd-Frank capital requirements is now law, despite the Obama administration’s disappointment that this provision was included.
One of the reasons the TRIA was not successfully renewed in 2014 was because of opposition against two other new provisions:
- A provision to streamline insurance producer licensing using the National Association of Registered Agents and Brokers (“NARAB II”).
- A provision requiring the Federal Reserve to have at least one community banker among its governors.
Both of these provision are also included in the bill that was signed into law.
PIB Law represents national banks, retailers, reinsurers, insurers, mortgage lenders and financial services companies from its offices in New Jersey, New York City, Philadelphia, Boston, San Antonio, and Chicago. For more information on reinsurance and insurance issues, contact PIB Law at 908-725-9700.