White House pledges veto of terror insurance bill

By Kevin Drawbaugh

WASHINGTON (Reuters) - The Bush administration threatened on Monday to veto a bill the U.S. House of Representatives is expected to vote on this week that would extend a post-9/11 federal terrorism risk insurance program.

"The administration strongly opposes efforts to expand the federal government's role in terrorism reinsurance," the White House said in a statement.

Critics of the program have called it a subsidy to the insurance industry and said terrorism risk insurance should be left up to the private market.

The program is favored by the insurance industry and big-city real estate developers.

The Terrorism Risk Insurance Act (TRIA) was adopted in 2002 after the September 11, 2001, attacks on the United States. It made the federal government an insurer of last resort if private insurers could not handle massive terrorism damages.

The program is set to expire at the end of this year, and insurers have been lobbying hard to renew it.

The House Financial Services Committee has voted to extend TRIA for 15 years, and the measure may go to the full House for a vote as early as this week. The Senate has taken no action on it.

The White House said in a statement: "The most efficient, lowest cost, and most innovative methods of providing terrorism risk insurance will come from the private sector."

It said the House bill "effectively makes TRIA permanent, increases the role of the federal government, and expands the scope of coverage well beyond the point where it is needed."

If sent as written to President George W. Bush, "his senior advisers would recommend that he veto the bill," the White House statement said.

TRIA's backers argue that private markets show few signs of being able to insure against terrorism. Some say, additionally, that markets should not be expected to handle such risk.

"TRIA is absolutely vital to our economy, and it needs to be renewed before its expiration date," said Ben McKay, senior vice president for federal government relations at the Property Casualty Insurers Association of America.

"After 9/11, there was a slowdown in commercial building because terrorism is an uninsurable risk. TRIA helped make terrorism insurance available and affordable," McKay said. "It would hurt our economy if we allow this much-needed program to lapse."

The House measure would add group life insurance to TRIA; extend coverage to domestic terrorism, as well as foreign; and mandate coverage for nuclear, biological, chemical and radiological terrorism under certain conditions.