Friday, December 26, 2014

TRIA Bill With Derivatives End User Relief Fails to Pass Senate at End of 113th Congress

The Senate adjourned without passing the Terrorism Risk Insurance Program Reauthorization Act, S. 2244, which contained relief for non-financial derivatives end-users, such as airline companies hedging the price of jet fuel, from the margin and capital requirements of Title VII of the Dodd-Frank Act. The House earlier essentially added the Business Risk Mitigation and Price Stabilization Act, which passed the House by a vote of 411-12 as Title III of S. 2244.

Without a doubt, the 114th Congress will again attempt to enact derivatives end-user relief for non-financial companies

The House-passed version included two contentious riders, one that sought to revise the Dodd-Frank Act by adding relief for non-financial derivatives end-users from the margin and capital requirements of the statute’s Title VII and a second that would have created a new clearinghouse, the National Association of Registered Agents and Brokers (NARAB), to streamline insurance agent and broker certification.

Some Senate Democrats and the White House voiced frustration and disapproval of the 11th-hour Dodd-Frank amendment, while Senator Tom Coburn (R-OK) objected to the NARAB provision because it did g\ive states a right to opt out. Because the House already had adjourned, TRIA’s forward momentum hinged upon unanimous consent by the Senate. When Senator Coburn refused to drop his objection, Senate Majority Leader Harry Reid (D-Nev.) realized that unanimous consent could not be achieved and opted not to keep the Senate in session any longer.

In a statement of policy, the White House strongly opposed the inclusion of modifications to the Dodd-Frank Act, specifically the end user provision. The White House said that broadening Dodd-Frank’s statutory exemptions is a complicated issue with serious implications for the health and stability of the financial markets. The main purpose of S. 2244 is to reauthorize the Terrorism Risk Insurance Program and the bill should not be used as a vehicle to add entirely unrelated financial regulatory provisions.