TRIA Must Be Extended
The Terrorism Risk Insurance Act of 2002 (TRIA) expires at the end of 2014. TRIA is the nation’s federal terrorism risk insurance plan. Enacted in 2002, Congress has previously approved two extensions: in 2005 it was extended for 2 years, and in 2007 it was extended for 7 years.
Terrorism continues to pose a clear and present danger to our nation and to the American economy. Lawmakers should reauthorize TRIA as part of our nation’s comprehensive economic security strategy.TRIA is necessary. The Government Accountability Office (GAO), President’s Working Group on Financial Markets and other terrorism risk observers have consistently concluded that “acts of terrorism” are uninsurable risks. The reinsurance industry, which withdrew from the market after 9/11, cannot accurately measure the risks – e.g., location, timing, mode and magnitude of potential losses – associated with a terror attack and does not have adequate capacity to cover the damages associated with another attack of the magnitude of 9/11.
The time for action is now. Main street businesses are already receiving “springing exclusion” notices that void terrorism coverage on policies extending past Dec. 2014; insurers have begun scaling back workers compensation policy options available to businesses with a high concentration of employees.
If TRIA expires, the economic repercussions will be significant. Rating agencies such as Fitch conclude that there will be numerous market repercussions if TRIA expires: terrorism coverage will not be available; commercial property financing, sales transactions and construction could greatly suffer; borrowers would be in violation of their financing covenants; and we would expect a period of profound economic slow-down – posing a very real threat to our economic and homeland security. For example, in the aftermath of 9/11, it was estimated that 300,000 jobs were lost due the lack of terrorism insurance coverage.
TRIA protects taxpayers. According to a RAND Corporation study, taxpayers are better served if TRIA remains in effect rather than being allowed to expire by Congress.
Without TRIA, taxpayers will be at risk. The federal government would almost certainly make an emergency appropriation to assist businesses and individuals harmed by a terrorist attack. Under the plan established by TRIA, private sector capital covers the first losses before any taxpayer funds are advanced. Additionally, the plan requires that any federal funds that are allocated after a terrorist attack be recouped from the private sector. Because of these provisions, the Congressional Budget Office (CBO) estimates that the current program has no projected net cost to taxpayers.
There is no homeland security without economic security. TRIA does not stop terrorist attacks, but it does undermine the goals of terrorists who seek to weaken or destroy our economy. TRIA allows our economy to move forward even in the face of terrorist threats and enables our economy to recover more quickly in the event of an actual terrorist attack.
Now is the time for Congress to extend TRIA
The Senate has already passed legislation (S. 2244) reauthorizing TRIA with an overwhelmingly bipartisan vote. However, the House is currently at an impasse on how to proceed to pass its own reauthorization bill (H.R. 4871). Time is running out. The House MUST act quickly to resolve their differences so Congress can take final action to renew the program this fall. We encourage House lawmakers to complete work to pass a long-term extension now.