Over 1 Million Businesses Breathe a Sigh of Relief as Congress Votes to Reinstate, Extend TRIA; Roundtable Applauds Lawmakers’ Swift, Decisive Action; Obama’s Signature Expected Soon
Just days into the new 114th session of Congress, U.S. lawmakers in both chambers overwhelmingly approved legislation to reinstate the expired Terrorism Risk Insurance Act (TRIA), and to extend the program through 2020. The bill, which is expected to be signed into law quickly by President Obama, will help avert would could have been a serious credit crunch in commercial real estate, billions of dollars in stalled or cancelled transactions, and a cascade of other downstream impacts on banks, investors, workers, financial markets, and the broader economy.
Roundtable Chairman Robert S. Taubman (Taubman Centers, Inc.)
applauded Congress for making TRIA its first order of business in the new year.
The Real Estate Roundtable, which has been working intensively on this issue for two years — in conjunction with its real estate trade association partners and the Coalition to Insure Against Terrorism (CIAT) — applauded Congress for making TRIA its first order of business in the new year.
In a press statement on Wednesday, after the House voted 416-5 for TRIA reauthorization, Roundtable Chairman Robert S. Taubman (Taubman Centers, Inc.) said, “The Roundtable praises the bipartisan efforts of House leaders in reaching consensus on legislation that is essential for the economic well-being of the United States and its commercial real estate markets.”
Also that day, House Speaker John Boehner (R-OH) said TRIA “is no ordinary insurance program: it reinforces the vigilance of hardworking Americans and furthers our commitment to protecting our economy and homeland — responsibilities we’ve all been reminded of today in the worst way possible,” a reference to the terrorist rampage at French publishing house Charlie Hebdo.
Following yesterday’s Senate TRIA vote of 93-4, Roundtable President and CEO Jeffrey DeBoer praised Senate Majority Leader Mitch McConnell (R-KY) and Minority Leader Harry Reid (D-NV) for acting “quickly and decisively on this important economic security issue.” DeBoer also expressed appreciation for the “dogged leadership of Sen. Charles Schumer (D-NY) in achieving” this week’s positive Senate action, adding, “We look forward to President Obama’s swift enactment of the Terrorism Risk Insurance Program Reauthorization Act of 2015.”
Schumer was quoted on NPR.org yesterday as saying that the program benefits not only insurance companies, but individuals — “people who work in buildings, office workers, restaurant workers, those who work at shopping centers, sports fans, those who care about having new stadiums.” NPR also cited The Real Estate Roundtable and its characterization of TRIA as an “essential public policy” that will “aid job creation and support economic growth nationwide.”
With the law’s expiration on Dec. 31, close to 1 million U.S. businesses — and commercial property valued at more than $4 trillion — became exposed to potentially catastrophic losses, due to sunset clauses on terrorism insurance coverage that took effect Jan. 1. (Another 500,000 policyholders were due to lose this coverage as their policies came up for renewal during the year.) Potential workers compensation losses facing businesses during TRIA’s lapse have also been staggering, multiplying the risks facing the economy.
Also as of Jan. 1, DeBoer told the Commercial Observer (for a Jan. 7 report preceding the House action), the majority of U.S. commercial borrowers have technically defaulted, since most loan documents require some form of insurance against acts of terrorism. Without action by Congress to renew the law, DeBoer said at the time, lenders could begin to pull out of the market.
Roundtable Chairman-Elect William C. Rudin (Rudin Management Company, Inc.) and Roundtable Board member Richard Clark (Brookfield Property Partners) also voiced heavy concerns to Commercial Observer about their companies’ existing and future debt without TRIA.
In a December interview, Rudin told the newspaper, “Our political leadership needs to understand what happens if it doesn’t get renewed,” explaining that TRIA’s absence would hamper future developments for his and other firms.
For Clark, who co-authored an op-ed on TRIA in Politico this past November, “The biggest concern for Brookfield is that we have a number of development projects in big cities in the works, the most notable being Manhattan West in New York City. This is a project that will ultimately cost $5 billion to construct. To get the kind of financing in place that we’ll need to advance that development will require terrorism insurance.”
Roundtable Chairman-Elect William C. Rudin, above, (Rudin Management Company, Inc.) also voiced heavy concerns about TRIA this week in Commercial Observer
DeBoer made a similar point in GlobeSt.com before Wednesday’s House action, saying that, without TRIA, “….a substantial number of financings and refinancing simply will not occur, causing unnecessary job losses.” Similarly, in an op-ed for The Hill newspaper (Jan. 6), he stated, “... any business property coming to market for sale — or any business property seeking refinancing — or any new business property development proposal — now faces a significant new financing hurdle since terrorism insurance will be very difficult, and in many cases simply impossible, to obtain.”
The six-year reauthorization bill now awaiting the president’s signature is virtually identical to the compromise bill that cleared the House in late December — but ultimately stalled in the Senate (Roundtable Weekly, Dec. 12 and 19). In addition to extending TRIA through Dec. 2020, the measure will reform the program by:
• increasing private-sector co-pays to 80-20% (up from 85-15%);
• gradually increasing the aggregate threshold at which government support becomes available (from $100 million to $200 million);
• increasing the amount that must be recouped by the federal government to $37.5 billion
• authorizing a study on bifurcation of the program, focused on conventional vs. “NBCR” (nuclear, biological, chemical, radiological) attacks;
The Roundtable wishes to thank all those who let their voices be known on this critical issue. This includes Roundtable members who contacted and/or visited their elected representatives in Washington and who signed onto coalition letters or op-eds; our partners in the multi-industry CIAT; organizations that published influential reports and/or hosted forums (e.g. RAND Corp. and Marsh), and congressional allies.
A special thank you to board member W. Edward Walter (Host Hotels and Resorts Inc.) for his tireless efforts to advance TRIA renewal on Capitol Hill.
A special thank you to board member W. Edward Walter (Host Hotels and Resorts Inc.) for his tireless efforts to advance this issue on Capitol Hill (including Senate Banking Committee testimony in early 2014) as well as with the news media (his most recent interview being with CNBC the day before Thanksgiving).
The Roundtable is hopeful that the bipartisan unity on display regarding TRIA — and the early legislative momentum it generated — will allow for productive debate and timely action on other important policy challenges.
These include tax reform, immigration, cyber security, infrastructure modernization, energy efficiency retrofit incentives, and Internet sales tax legislation (“Marketplace Fairness Act”) — all of which will likely be discussed at The Roundtable’s upcoming 2015 State of the Industry Meeting on Jan. 27-28.
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