Last Friday we reported that the House of Representatives had finally passed a bill reauthorizing the Terrorism Risk Insurance Act (TRIA) and sent it to the Senate.  The post included a picture of a cartoon bomb with a lit fuse because the statute was due to expire in only two weeks.  On Tuesday, in an epic act of irresponsibility, the Senate allowed that to happen, adjourning for the year without taking up the measure and leaving TRIA to sunset on December 31st.

Congress has a bad habit of larding important legislation like TRIA with wholly-unrelated provisions, and it was one of those that doomed reauthorization.  When the Senate wrote its own reauthorization bill earlier this year, it proposed including a provision creating the National Association of Registered Agents and Brokers (NARAB), a non-profit clearinghouse made up of state insurance commissioners and insurance market representatives which would oversee and streamline the licensing of agents and brokers.  Senator Tom Coburn (R-Okla.) was opposed, believing that to be a federal infringement on authority traditionally reserved for the individual states, and the Senate bill that was sent to the House on July 17th sunset NARAB after two years.

When the House passed its own reauthorization bill and sent it back to the Senate on Friday, one of its changes was to eliminate NARAB’s sunset date.  That stuck in Senator Coburn’s craw, and he placed a hold on the bill, telling the Senate on Tuesday that the NARAB provision “takes away the 10th Amendment right of every state to control their own insurance agents and brokers.”

Legislation passes the Senate in one of two ways.  A minority of bills are enacted after a debate on the Senate floor and a roll call vote – a procedure that can take days.  Most pass under what is called “the rule of unanimous consent,” however, meaning that no debate is required.  As the name implies, a single Senator can prevent that from happening by placing a “hold” on the bill.  Senator Coburn is a frequent user of holds.  On Monday, he also blocked a veterans’ suicide prevention bill that had passed the House on a voice vote and had wide bipartisan support in the Senate by placing a hold on the measure.

Many Democrats were opposed to a provision in the House’s TRIA bill that weakened parts of the Dodd-Frank Act – another tack-on unrelated to TRIA – but they were begrudgingly willing to clear the TRIA package for President Obama’s signature in order to keep the terrorism backstop in place.  Senator Coburn – who is retiring from the Senate this year – was not so accommodating.  By Tuesday, when he placed a hold on the bill, it was too late to send an altered version back to the House because the lower chamber had already adjourned for the year, and its leaders made it clear that they were unwilling to return to Washington to revisit TRIA.  The Senate could have chosen to stay in session longer in order to get around Senator Coburn’s objections, but the Senators were both exhausted after a long and contentious fight over the $1.1 trillion “cromnibus” appropriations bill and also eager to leave town for the holidays.  They decamped and let TRIA pass away.

The immediate ramifications are uncertain.  January 1st is a common renewal date, and some terrorism risk policies also have exclusions that void coverage in the event of TRIA’s expiration.  In addition, many construction lenders require terrorism risk insurance, and Congressional inaction creates the danger that borrowers could unexpectedly find themselves in technical default on their loans.  There has even been speculation about truly catastrophic scenarios such as the possibility that the February 1st Super Bowl might have to be cancelled!

The 114th Congress is sworn in early January, and both Republican and Democrats say that a new bill will be a priority.  As the GOP whip, Senator John Cornyn (R-Tex.), said on Wednesday, it will be “number one in a long list of things we need to do.”  The prospects of reviving TRIA’s corpse are nonetheless uncertain, however.  The Dodd-Frank Act provision in the House bill gave Democrats heartburn, and they will fight hard to remove it now that they have some breathing room.  In addition, Congress has to go back to the beginning and start all over again; many Republicans have long been opposed to the whole notion of a federal backstop.  House Financial Services Chairman Jeb Hensarling (R-Tex.) – who authored the House bill — has repeatedly expressed his desire to scale TRIA back in order to “facilitate a transition to a viable market for private terrorism risk insurance.”  He now has his chance to do just that.