Senate Overwhelmingly Approves Seven-Year TRIA Reauthorization; House Outlook Unclear After Hensarling Comments
In a resounding display of bipartisan unity, the Senate yesterday voted 93-4 to approve the “Terrorism Risk Insurance Program Reauthorization Act of 2014” (S. 2244) — legislation to reauthorize the expiring Terrorism Risk Insurance Act (TRIA) for seven years. As The Real Estate Roundtable, Coalition to Insure Against Terrorism (CIAT), Real Estate Board of New York (REBNY) and other stakeholders applauded the Senate action and urged the House to follow suit, House Financial Services Committee Chairman Jeb Hensarling (R-TX) issued a discouraging statement suggesting it could take several more months of deliberations to come up with a plan that could clear the lower chamber.
Sen. Charles Schumer (D-NY) is a key sponsor of
, the TRIA bill that cleared the Senate by a vote of 93-4.
Sen. Charles Schumer (D-NY), a key sponsor of S. 2244, emphasized TRIA’s indispensible role in real estate and the economy.
“In a post-9/11 world, developers and business owners embarking on multiyear, multimillion or billion-dollar construction projects need to be certain they can insure their investments,” said Schumer. “At a time when our economy is not growing as robustly as we’d like, failing to renew [TRIA] would be particularly foolish. Without (the program), it’s a virtual certainty that a large number of construction jobs and economic development would be lost.”
The Roundtable, which made a final appeal to all U.S. Senators by email yesterday morning, followed the Senate vote with a press statement commending the chamber for addressing this urgent issue and restating its macroeconomic implications.
“Without Congressional action, TRIA will expire at year-end, causing a cascade of negative effects for businesses and institutions of all kinds that need terrorism insurance to protect against potentially catastrophic losses,” Roundtable President and CEO Jeff DeBoer stated.
“This includes the commercial real estate sector, where owners will either go into technical default on existing loans (if they lack terrorism coverage), or be unable to obtain financing for new projects, as lenders require terrorism insurance on the loan collateral,” he added. “This will surely lead to significant delays in all types of real estate transactions — such as purchases, sales, refinancing and construction — as well as significant job losses across the country.”
House Financial Services Committee Chairman Jeb Hensarling (R-TX) issued a discouraging statement suggesting it could take several more months of deliberations to come up with a plan on TRIA that could clear the lower chamber.
The White House also expressed support for the Senate bill, stating, “Terrorism insurance is necessary for a broad range of economic activities in areas across the country, and would be prohibitively expensive or unavailable in the absence of the program” (AP, July 17).
As for the House dynamics on TRIA, reportedly there is a behind-the-scenes power struggle among Republicans, with some “agitating for less backstop support for the coverage and others pushing to keep the trigger at $100 million” (GlobeSt.com, July 18).
Earlier this week, Rep. Peter T. King (R-NY) warned that 30 or more House Republicans would join Democrats in opposing Hensarling’s bill (H.R. 4871), which narrowly cleared the Financial Services Committee on June 20 (CQ-Roll Call, July 18).
“Hensarling, a rising conservative star with seeming designs on a House leadership post, is making things very difficult for current GOP leaders, who are eager to get what is a top business priority completed,” CQ-Roll Call reported.
Hensarling yesterday characterized the Senate TRIA bill as “essentially, a status quo bill that uses a phony Washington budget gimmick as a pay-for, meaning it can’t even come to the House floor as written.”
He added that he is “still committed to getting a bill passed, but it has become very clear this week that the process is going to take several more months before there is a resolution. We have a diverse Republican caucus in the House. We have some members who believe the reforms go too far and we also have a host of conservatives who feel the reforms don’t go far enough. Washington is paying a lot of attention to one group’s concerns, but not enough attention to the other’s. That’s got to change if any TRIA bill is going to pass.”
S. 2244 and H.R. 4871 both propose for insurers to bear a larger proportion of losses from future terrorist attacks. However, the House bill differentiates between conventional terrorist attacks and those involving nuclear, biological, chemical or radiological (NBCR) weapons.
Additionally, beginning Jan. 1, 2016, the trigger for tapping the program following conventional attacks would increase [under the House bill] by $100 million per year to $500 million in 2019. The program trigger for NBCR attacks would remain at $100 million.
A report issued by the President’s Working Group on Financial Markets in April said the private market for terrorism insurance is “tightening” amid uncertainty over TRIA’s scheduled expiration on Dec. 31. The report also warned that, if TRIA is not reauthorized before year-end, terrorism risk insurance will become less available and more expensive, and coverage will become more limited.
Roundtable Members Should Maintain Pressure on Congress
With the focus now on the House, 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.
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