Policy Issues

Terrorism Risk Insurance Act of 2002 (TRIA) – Overview

• Some insight into the effects of a lack of terrorism insurance were shown during the 14-month period between the September 2001 terrorist attacks and the November 2002 passage of TRIA.   In September 2002, a Real Estate Roundtable survey found that “$15.5 billion of real estate projects in 17 states were stalled or cancelled because of a continuing scarcity of terrorism insurance.”  Additionally, Moody’s Investors Service downgraded $4.5 billion in commercial mortgage-backed securities "citing concerns about terrorism insurance coverage." (Roundtable News Release, Sept. 19, 2002 and Moody's, Sept. 27, 2002) 

• On Oct. 12, 2002 President George W. Bush said, "The lack of terrorism insurance has delayed or cancelled more than $15 billion in real estate transactions. The $15 billion worth of delay has cost 300,000 jobs – jobs to carpenters and joiners, bricklayers, plumbers and other hardworking Americans." (Radio Address by the President to the Nation, White House Archives, Oct. 12, 2002)

• Working with the FIO, the TRIA Advisory Committee on Risk-Sharing Mechanisms (ACRSM); the insurance industry; our policyholder coalition (CIAT); and Congressional and Administration policymakers, The Roundtable is focused on developing an effective, long-term approach for a federal terrorism risk insurance program.   Such a long-term program should enable policyholders to secure the terrorism risk coverage they need without facing periodic renewals by the federal government. 

Extending the Nation’s Terrorism Risk Insurance Plan

The Roundtable is focused on developing an effective, long-term approach for a federal terrorism risk insurance program.   Such a long-term program should enable policyholders to secure the terrorism risk coverage they need without facing periodic renewals by the federal government. 

TRIA Advocacy

• The staggering economic impact of this market condition must not be forgotten. A Real Estate Roundtable survey about the 14-month post-9/11, pre-TRIA period revealed that more than $15 billion in real estate related transactions were either stalled or cancelled because of a lack of terrorism insurance.  The White House Council of Economic Advisors estimated that 300,000 jobs were lost due to delayed construction projects during this period, and Moody’s Investors Service downgraded $4.5 billion in commercial mortgage-backed securities (CMBS).  TRIA was intended to ensure that the economy was strong enough to withstand a future attack. That purpose remains as important today as it was in November 2002 . 

• The Coalition To Insure Against Terrorism, which includes The Real Estate Roundtable, submitted a  letter to the Senate Banking Committee on June 18, 2019 urging congressional action on a long-term reauthorization of the Terrorism Risk Insurance Program. 

• 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. 

• Working with the FIO, the TRIA Advisory Committee on Risk-Sharing Mechanisms (ACRSM); the insurance industry; our policyholder coalition (CIAT); and Congressional and Administration policymakers, The Roundtable is focused on developing an effective, long-term approach for a federal terrorism risk insurance program.   Such a long-term program should enable policyholders to secure the terrorism risk coverage they need without facing periodic renewals by the federal government. 

Marsh's 2019 Terrorism Risk Insurance Report

According to a  2019 Marsh Terrorism Risk Insurance study, the education, health care, financial institutions, and real estate sectors had the highest take-up rates among the 17 industry segments surveyed – all above 70%.

Last month, Marsh's property terrorism placement and advisory leader Tarique Nageer testified before the Senate Banking Committee stating that the expiration of TRIPRA without a replacement could create capacity shortfalls, especially for firms with "significant workers' compensation accumulations. 

Nageer stated, "We are already seeing an impact on policies that extend beyond 2020, with some insurers either seemingly unwilling to offer terrorism coverage beyond the expiration of TRIPRA or seeking to increase prices to cover the additional risk to their portfolios. Without a decision to reauthorize or extend TRIPRA, we expect to see more sunset provisions in policies and higher costs as we get closer to December 31, 2020." (Nageer's testimony, June 18)

 

2018: Report on the Overall Effectiveness of the Terrorism Risk Insurance Program

A  June 2018 report by the Treasury’s Federal Insurance Office (FIO) entitled  Report on the Overall Effectiveness of the Terrorism Risk Insurance Program concluded:  

• The TRIA Program generally has been effective in making terrorism risk insurance available and affordable in the insurance marketplace.

• Treasury has not observed any aspects of the Program (either based upon the collected data or operation of the Program generally) that have had the effect of discouraging or impeding insurers from providing P&C insurance in general, or coverage for acts of terrorism specifically. 

• The Program serves as an important backstop to workers’ compensation insurance, given that under state law, workers’ compensation insurance must cover terrorism risk, is not subject to limits of liability, and cannot exclude causes of loss posing extreme aggregation risks.

• Treasury’s estimate of total earned premiums for terrorism risk insurance from 2003 to 2017 is approximately $37.6 billion (excepting captive insurers), which is between 1 and 2 percent of the total premiums earned in the TRIP-eligible lines of insurance during that period. 

• 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.  

• A September 2004 report, The Ecconomic Importance of Federal Participation in Terrorism Risk, was co-authored by R. Glenn Hubbard, dean of Columbia University’s Graduate School of Business and former chairman of the White House Council of Economic Advisers; and Bruce Deal, managing principal at Analysis Group, Inc., an economic, financial, and business strategy consulting firm.  The authors state that “fundamental issues specific to terrorism. . . make these risks very difficult for private insurers to fully absorb,” and that “eliminating the likelihood and location of such extreme events is virtually impossible.”

Other Resources

• Marsh's 2019 Terrorism Risk Insurance Report  

• A summary by theInsurance Journal about the Marsh report, "What Might Happen If Conress Fails to Renew Terrorism Reinsurance Program" 

• Congressional Research Service (CRS) report on TRIA  

• Edward Zonenberg, Senior Financial Analyst with AM Best discusses mitigation planning in the event of a possible lapse or shutdown of TRIA