Does Syria Bode Ill for TRIA?

Courtesy of AOC

By Mark E. Ruquet

In the Congressional debate leading up to a vote on whether the United States should hold the government of Syria accountable for using sarin gas against its citizen I can’t help but wonder if this holds some implications for the property and casualty insurance industry as it tries to push its own agenda through Congress.

On the surface, an observer would think there is no link between the two. The Syria question is a foreign policy issue, and for the P&C industry its concern would be with insured losses, which would should be nil because of War exclusions. Then again, if Bashar al-Assad, Syria’s president, and his cronies have a smart insurance broker—and an insurer charging some pretty hefty premiums—anything is possible.

What carriers and brokers really need to be worried about is the fractured state of Congress. Granted, this vote is a “vote of conscious”, as many commentators like to point out. It would be naïve to believe that some arm-twisting isn’t going on behind the scenes among Democrats to hold al-Assad to account for crimes against humanity. What should concern the P&C industry is that when issues of great consequence to insurers come before Congress can state regulators and lobbying groups muster the interest and votes of legislators whose attention is elsewhere.

Case in point is the reauthorization of the Terrorism Risk Insurance Act. The insurance backstop, designed to provide coverage to carriers for a catastrophic act of terrorism, expires in 2014. The Council of Insurance Agents & Brokers, The Property Casualty Insurers Association of America and many other agent and company groups support another extension of the backstop. On Aug. 26, the National Association of Insurance Commissioners passed a resolution supporting reauthorization. You would assume that with such strong backing from the industry and regulators passage would be a no brainer.

However, when one looks at Congressional consternation over Syria, the inability of Congress to iron out the federal budget, and in-action on immigration, the realities about Washington posturing do not bode well for action on TRIA. Congressional leadership isn’t what it was in the old days where the combination of fear of retribution and strength of personal relationship worked to develop solutions in the national interest instead of fodder for late night commentators.

It is too soon to tell if opposition to TRIA is growing, but in some circles “backstop” equates to “bail-out”. In one commentary, the Heartland Institute says the act “to subsidize the terrorism insurance market in perpetuity is not a sound long term policy.” Other conservative groups have long opposed the program. 

Robert Hartwig, president of the Insurance Information Institute, notes that many in Congress today were not around when the act won passage earlier and may view it as a regional issue not their time, effort and votes.  It may not help that introduction of the bill to renew TRIA was backed by a coalition of Democrats and Republicans primarily from New York.

While we can hope the debate over what to do about Syria remains a serious discussion without partisan theatrics, it does underscore the reality that legislators are increasingly parochial in addressing issues to a narrow base of politically active constituents. In the current political climate, the industry has its work cut out for itself on TRIA's renewal.