In one of its final acts before adjourning for the year, Congress cleared a seven-year extension of the nation’s terrorism insurance backstop that makes few changes to the existing program, which was set to expire at year’s end.
House and Senate proposals disagreed over how long to extend the program and whether to expand it to require insurers to include group life insurance and make coverage available for nuclear, biological, chemical or radiological attacks. The House initially sought a fifteen-year extension but settled on the Senate bill’s seven-year timeframe. The final agreement also excluded the inclusion of group life insurance and a reduction in the trigger for federal intervention from $100 million to $50 million in losses, supported by smaller insurance companies. The bill calls for a study of coverage for nuclear, biological, chemical and radiological attacks.
Efforts by Property & Casualty and Life insurers to implement an optional federal charter did not materialize this year, as legislation creating one went unaddressed by Congress. The National Insurance Act of 2007 would allow the insurance industry to function in a manner similar to banks, which can operate either under supervision of states or the federal Office of the Comptroller of the Currency. The bill would establish an independent federal insurance commissioner within the Treasury Department and a consumer protection division under his control. While strongly supported by insurance industry trade groups, the proposal faces significant opposition from the NAIC, as well as the independent agents. Additional Congressional hearings on the matter are expected in the coming year.
Another bill being left to next year would exclude federal taxes on half the income generated by an annuity, up to a maximum of $20,000 annually. The Retirement Security for Life Act would provide favorable tax treatment for lifetime annuity payments coming from life insurance death benefits.