With Time Running Out on Expiring Terrorism Insurance Law, 117 CEOs Urge House to Act; Metro-Area GOP Lawmakers Said to Oppose Hensarling’s Effort to Scale Back TRIA
Faced with the prospect that Congress could recess in early August without acting on the expiring Terrorism Risk Insurance Act (TRIA), over 100 business CEOs — representing some of the nation’s largest employers — wrote to U.S. House leaders on Tuesday urging swift action on TRIA reauthorization (Crain’s New York Business, July 23). The 117 CEOs who signed the letter to House Speaker John Boehner (R-OH), incoming Majority Leader Kevin McCarthy (R-CA) and Majority Whip-Elect Steve Scalise (R-LA) included top commercial real estate executives.
“As currently designed, the Terrorism Risk Insurance Act (TRIA) program works, and is what makes it possible to maintain our vibrant economy in the face of what we all recognize as a significant risk,” the New York-based business leaders stated in their July 23 letter. They characterized TRIA as “one of the 21st Century tools we rely on to protect American jobs and allow investment to continue, despite the risk of terrorism.”
Kathryn Wylde, president and CEO of the Partnership for New York City— which organized the letter-writing campaign — added, “We have major employers in New York that are facing the need to extend their insurance policies now, and at this point, it’s extraordinarily difficult without an extension of TRIA” (Newsday, July 24).
The CEO letter came as the 9/11 Commission this week warned of a growing array of threats — from ISIS to cyber terrorism — and an American public that is increasingly complacent about the risk of a terrorist strike more than a decade after 9/11 (The Wall Street Journal, July 22). The commission, which reconvened for the 10th anniversary of its high-profile report, was particularly concerned about the state of the nation’s cyber-defenses.
“As the country becomes ever more dependent on digital services for the functioning of critical infrastructure, business, education, finances, communications, and social connections, the Internet’s vulnerabilities are outpacing the nation’s ability to secure it,” the commission stated, chastising Congress for failing “to pass basic cybersecurity legislation” despite a “growing chorus of senior national security officials [who] describe the cyber domain as the battlefield of the future.” (Govinfosecurity.com, July 23).
Members of New York’s congressional delegation, including Rep. Carolyn Maloney (D-NY) and Peter King (R-NY), continue to sound the alarm on TRIA and the implications of inadequate terrorism insurance for the nation’s — and the city’s — economies.
King reportedly has the backing of 25-30 Republicans from metropolitan areas who are unhappy with efforts by House Financial Services Chair Jeb Hensarling (R-TX) and his conservative allies to scale back TRIA’s protections and increase insurers’ “skin-in-the-game” (Times Ledger, July 23). Last week, after the Senate voted 93-4 for a seven-year extension, Hensarling said it could take months to resolve differences between the two bills.
Maloney last Friday said House leaders must consider modifying the bill passed by Hensarling’s committee (H.R. 4871) or risk defeat on the chamber floor. “Failing that, the House should bring up the Senate-passed bill, which I believe would have the votes to pass the House.”
Added Maloney, “It is unfortunate that the effort to reauthorize this legislation, which is essential to our economy and job creation, has become mired in partisanship and controversy in the House. The TRIA program doesn’t cost the federal government a dime and would save taxpayers money in the event of an attack by spreading risk and limiting the government’s exposure.”
Members of New York’s congressional delegation, including Rep. Peter King (R-NY), above, continue to sound the alarm on TRIA and the implications of inadequate terrorism insurance for the nation’s — and the city’s — economies.
Writing on CNBC.com on Tuesday, Wharton School professors Howard Kunreauther and Erwann Michel-Kerjan said they are poised to release a new report (TRIA after 2014) comparing the Senate-passed bill and its House counterpart — including their differing approaches to risk-sharing. The analyses are reportedly based on scenarios of financial losses from terrorist attacks in Chicago, Houston, Los Angeles and New York, provided by the modeling firm Risk Managements Solutions and the impacts on 750 insurers operating in these markets.
As Kunreather and Erwann-Kerjan stated July 22, “The findings that we will present at a briefing in the U.S. Senate on July 24 surprised us and others. We find, for instance, that under the current program, losses from a terrorist attack would have to exceed $40 billion before the taxpayers pay a penny. The Senate and House bills would raise the taxpayer threshold level anywhere from 30 percent to 85 percent.”
The professors also drew attention to TRIA’s mandatory recoupment provisions affecting commercial policyholders. “Consider a $50 billion attack against New York City. Under TRIA today, all insured commercial enterprises across the nation would pay about $7 billion. It could be nearly $17 billion under the Senate bill and as high as $18 billion under the House bill,” they explained.
Roundtable board member Ed Walter similarly explained TRIA’s risk-sharing mechanisms in an op-ed for Roll Call newspaper on June 24, saying that TRIA requires insurers and policyholders “to bear the first-dollar loss up to a formula-defined level that could be as much as $37 billion in claims resulting from a terrorist attack, and insurers remain on the hook for a share of any losses above that level.”
In a statement last week (July 17), The Roundtable warned that congressional inaction on TRIA would cause a cascade of negative effects for businesses and institutions of all kinds that need terrorism insurance to protect against potentially catastrophic losses.
Roundtable Members Should Maintain Pressure on Congress
Roundtable members are urged to help maintain pressure on Congress by continuing to write, call or tweet U.S. officials about the need for immediate action on TRIA — using our grass-roots advocacy tool and micro-website “Engage.”
Lawmakers should be reminded that terrorism is a man-made, constantly-evolving threat that strikes in a totally unpredictable manner — making it virtually impossible for private insurers to model or price such risk. They should also be reminded of the various mechanisms TRIA employs to protect taxpayers, U.S. economic security, and U.S. homeland security.
For further reference:
• April 10 RAND Corp. report (The Impact of Eliminating the Terrorism Risk Insurance Program on Federal Spending) confirming that TRIA saves taxpayers money, particularly for terrorist incidents on the scale of 9/11
• March 6 report by the RAND Corp. discussing TRIA’s role in protecting U.S. national security (National Security Perspectives on Terrorism Risk Insurance in the United States)
• March 17 report by Standard & Poors (TRIPRA On the Brink of Expiration: A Ratings Perspective) warning that excessive changes in TRIA’s structure — to increase insurers’ “skin in the game” — could trigger ratings downgrades for smaller insurers, while limiting availability of indirect terrorism coverage.
# # #