Terrorism Risk Insurance
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President Bush Signs Terrroism Insurance Extension Bill Position — Issue Summary — Status
See "The Importance of Extending The Federal Terrorism Risk Insurance Program" American businesses, income property owners and investors must have adequate insurance to effectively manage economic risks and protect the economic value of their underlying assets. Despite the success of the program established by the Terrorism Risk Insurance Act of 2002 (TRIA) and extended under the Terrorism Risk Insurance Extension Act of 2005 (TRIEA), there is no evidence that insurance markets will ever develop adequate capacity absent some type of federal backstop.
A meaningful private market for terrorism risk insurance has never existed. The devastation of September 11th, and the recognition that terrorism risk will be with us for the foreseeable future forced insurers to exclude this coverage, leaving policyholders unable to attain sufficient levels of this essential coverage. Fourteen other nations recognize that markets are unable to effectively manage this risk and have enacted permanent federal programs to address this problem. Terrorism risk is a national problem that requires a federal solution Over the past five years, the federal program created under TRIA (and extended under TRIEA) has successfully enabled policyholders to obtain essential terrorism insurance coverage without imposing additional costs on U.S. taxpayers. In fact, the federal backstop is the sole reason that any meaningful market whatsoever exists in this sector. This program helped ease much of the uncertainty faced by property owners, lenders, bondholders and other stakeholders about the availability of terrorism insurance — and averted what could easily have been a significant dislocation in U.S. real estate markets.
December 26, 2007 - CQ Politics: December 21, 2007 - Roundtable Weekly: On November 16, the Senate approved by unanimous vote the Terrorism Risk Insurance Program Reauthorization Act of 2007 (TRIPRA). This significant bi-partisan compromise would extend TRIA for 7 years and eliminate the current distinction between foreign and domestic acts of terrorism in the trigger provision. TRIPRA also contains three important study provisions that would require the Comptroller General to report to Congress on (1) the unique terrorism insurance capacity constraints in specific markets, (2) the availability and affordability of nuclear, biological, chemical and radiological (NBCR) coverage, and (3) it would require the President's Working Group on Financial Markets to continue to report to Congress on the long term availability and affordability of terrorism risk insurance. On September 19th, the House of Representatives passed H.R. 2761, the Terrorism Risk Insurance Revision and Extension Act of 2007 (TRIREA), by a vote of 312 to 110. The legislation would extend the Terrorism Risk Insurance Act (TRIA) for fifteen years, expand TRIA’s “make available” requirement to include NBCR coverage; change TRIA’s definition of act of terrorism to include acts of domestic terrorism; reduce the program trigger at $50 million; add group life insurance to the lines of insurance for which terrorism coverage must be made available; decrease deductibles for terrorist attacks over $1 billion and decrease the trigger after such events; and continue to require studies of the development of a private market for terrorism risk insurance. The Administration issued a formal veto threat of the House-passed bill. Although the Treasury Department forwarded a letter to the Senate Banking Committee reiterating its position on the terrorism risk insurance legislation, the Senate bill has not opposed opposed. No timeframe has been given as to when work with the House will produce a final bil to send to the President, and we do not yet have a bill number.
Roundtable Advertisement on TRIA in "Terrorists continue to plot ... while a key tool of U.S. economic & homeland security faces expiration."
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