Extending the Nation’s Terrorism Risk Insurance Plan
Six-Year TRIA Renewal Through December 31, 2020 Makes Modifications to the Program
The President signed into law H.R. 26, the "Terrorism Risk Insurance Program Reauthorization Act of 2015," which extends authorization of the Terrorism Risk Insurance Program through December 31, 2020, and makes modifications to the Program. The Roundtable commended the enactment of the legislation.
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. See Roundtable Weekly, January 9, 2015 and January 16, 2015.
The Senate's bipartisan vote of 93-4 —preceded by the House's vote of 416-5 the day before — were approvals to extend for six years the Terrorism Risk Insurance Act (TRIA), a significant policy tool against the potential economic fallout of terrorism that helps protect businesses nationwide from ongoing threats, provides certainty to commercial real estate markets and allows transactions to move forward without significant interruption. The bill now goes to the President for his signature and enactment.
The Real Estate Roundtable, Coalition to Insure Against Terrorism (CIAT), Real Estate Board of New York (REBNY)
and other stakeholders applaud both the Senate and House action and look forward to President Obama's signature of the Terrorism Risk Insurance Act (TRIA) — a top
priority for commercial real estate and other economic sectors that
need terrorism insurance to operate.
Note: More detailed information on various Capital and Credit policy issues can be found in recent issues of Roundtable Weekly — our weekly policy eNewsletter archive that can searched by key word or phrase.
> Terrorism Risk Insurance Act of 2002 (TRIA) – Overview
- Extensions to the federal terrorism risk insurance program established by the Terrorism Risk Insurance Act of 2002 (TRIA) are scheduled to sunset at the end of 2014. Since a viable private sector marketplace for this coverage does not yet exist, the program’s expiration would leave policyholders and taxpayers exposed and unprotected.
- At almost no cost to the taxpayer, the national terrorism risk insurance program has made it possible for more than a decade for businesses to purchase terrorism risk coverage.
- Maintaining TRIA is critical to protecting the economy from potentially catastrophic losses and the kind of paralysis that ensued after 9/11. It is also critical to ensuring the continued availability of credit for commercial real estate, since terrorism insurance coverage is required by lenders as part of most loan covenants.
- The Roundtable is a leader in the Coalition to Insure Against Terrorism (CIAT) – a broad coalition of commercial insurance consumers formed after 9/11 advocating for the extension of TRIA.
> TRIA Advocacy
Roundtable President and CEO Jeffrey DeBoer
reinforced the urgent need for Congress to extend TRIA in an interview with DLA Piper at their recent
conference in Chicago. Given the diverse threats facing the U.S. — including
ISIS and cyber-attacks — DeBoer said congressional inaction on TRIA “would be
devastating for liquidity issues, for financing, refinancing . . . just doing
business in America.”
On Bloomberg TV recenelyk, Roundtable
Chairman-Elect William C. Rudin said, likewise, that TRIA is a “national issue”
— one that transcends geography and affects businesses and institutions of
all kinds, not just commercial real estate. “We need to get the House to move as
quickly as possible,” he told Bloomberg TV’s Betty Liu.
Faced with the prospect that Congress would 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 July 23 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. Read more in Roundtable Weekly ...
The Wharton Risk Management Center also recently released its report, “TRIA After 2014: Examining Risk Sharing Under Current and Alternative Designs” that analyzes the impact of loss-sharing for different stakeholders. The analysis builds on data drawn from over 750 insurers across the United States by analyzing terrorist attack simulations in partnership with the risk modeling firm, Risk Management Solutions, in four states of the U.S.: California, Illinois, New York, and Texas. The report is available free-of-charge at http://www.wharton.upenn.edu/riskcenter. Also see a recent op-ed about TRIA on CNBC by Howard Kunreuther and Erwann Michel-Kerjan, professors at the Wharton School, that addresses some of the issues surrounding TRIA’s renewal.
In Senate Banking Committee testimony in February, real estate and insurance industry representatives urged timely reauthorization of the Terrorism Risk Insurance Act (TRIA) — well before the law’s scheduled expiration on Dec. 31 — to protect U.S. national and economic security, as well as commercial real estate credit availability. Witnesses also emphasized the need for long-term certainty regarding the program, calling for a minimum extension of 7 years, but preferring a permanent one.
A recent report by insurance broker Marsh warned that insurers have begun scaling back workers compensation policy options available to businesses with high concentrations of employees in major cities — amounting to a de facto transfer of risk onto buyers.
The RAND Corporation has completed two segments of a three phase study on terrorism risk insurance. The first one is National Security Perspectives on Terrorism Risk Insurance in the United States. The second one is The Impact of Federal Spending on Allowing the Terrorism Risk Insurance Act to Expire, which shows how TRIA helps protect U.S. taxpayers — particularly for catastrophic events on the scale of 9/11 — and that the program’s expiration at year-end would mean bigger federal outlays in the event of future terrorist attacks. The third phase will be devoted to the impact of TRIA on the workers compensation market and is scheduled for publication in May.
At a Virginia Commonwealth University (VCU) forum in Richmond in March on the expiring federal Terrorism Risk Insurance Act (TRIA), panelists emphasized that terrorism insurance is vital to businesses and public institutions outside of urban centers, and that terrorism is meant as an attack on the country, its government and way of life — vs. individual property owners in cities like New York and San Francisco (Richmond-Times Dispatch reported March 13).
An industry Risk Management Working Group (RMWG) has been formed to help The Roundtable’s efforts on this issue of great importance to real estate.
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