Senate Panel Extends Terrorism Insurance Program for Seven Years

By Alan Zibel and Ryan Tracy 

        WASHINGTON--A U.S. Senate panel voted Tuesday to extend the federal government's terrorism insurance program, and lawmakers in both parties indicated support exists for a separate measure giving the Federal Reserve more flexibility in regulating insurance companies.
        In a bipartisan and unanimous vote, the Senate Banking Committee approved a bill to extend the government's terrorism-insurance program for seven years. The measure could come up for a vote in the full Senate within the next few weeks, according to a Democratic aide.
        The federal Terrorism Risk Insurance Program is due to expire at the end of the year. It was established after the Sept. 11, 2001 terrorist attacks on the U.S. to make sure terrorism insurance policies are still available for property owners. Such policies are taken out by real-estate developers, hotel chains and others.
        Under the program, the government is required to cover a portion of the insured losses from a terrorist attack once the loss amount passes a certain threshold.
        The program, which has been extended twice previously, also allows the government to recoup any taxpayer funds paid out through the program through surcharges on policyholders.
        Many corporations, professional sports leagues and major universities have joined with the insurance industry in pushing for another extension.
        The program "allows the 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 were the program not there, " said Idaho Sen. Mike Crapo, the banking panel's top Republican.
        Mr. Crapo said he pushed to include protections for taxpayers, including a $2 billion a year increase in an industrywide assessment on property-casualty insurance policies.
        If the bill clears the Senate, it faces an uncertain future in the House, where conservatives such as House Financial Services Committee Chairman Jeb Hensarling (R., Texas) have been skeptical about the potential of taxpayer dollars being used to support private firms.
        Critics say the program, originally intended to be a temporary backstop, puts taxpayer dollars at risk and acts as a federal subsidy for insurers.
        The banking panel didn't vote on another piece of legislation that would tweak the 2010 Dodd-Frank financial overhaul law by giving the Fed more power to tailor its capital rules for insurers, rather than use requirements designed for banks.
        Lawmakers of both parties, including Sen. Mike Johanns (R, Neb.) and Sen. Sherrod Brown (D., Ohio) said they intend to move this legislation through a Senate process reserved for uncontroversial measures. If there is objection, the lawmakers said they plan to attach the measure to the terrorism bill when it reaches the Senate floor. A companion bill in the House has more than 50 sponsors, with a roughly equal mix of Republicans and Democrats.
        The Fed hasn't given a timeline on the capital rules. On Monday it announced the hiring of a former state regulator to head its insurance supervision team, signaling it is preparing to move forward.
        Insurers have been pushing regulators and lawmakers to ensure that any capital requirements for the largest financial firms take into account their business model, which differs from those of banks.
        The Dodd-Frank law requires the Fed to impose capital requirements on nonbank companies whose collapse regulators determine could threaten the health of the financial system.
        Michael R. Crittenden contributed to this article.
        Write to Alan Zibel at alan.zibel@wsj.com and Ryan Tracy at ryan.tracy@wsj.com
        (END) Dow Jones Newswires

        June 03, 2014 11:53 ET (15:53 GMT)