Richard Carlson Of Fitch

It should come as a surprise to no one that the clock is ticking on a federal terrorism-insurance backstop. The failure of TRIA is likely to set the industry back three years to the havoc-time between Sept. 11 and passage of the original act, when high-profile buildings were as vulnerable to the financial impact of a potential attack as much as from an attack itself. Fitch Ratings recently weighed in on the subject, specifically on how TRIA’s death would impact the CMBS market. Chicago-based Richard Carlson, Fitch’s director of commercial mortgages, says the impact won’t be the same; it could be worse. In a recent interview with GlobeSt.com, he elaborated:

GlobeSt.com: Can you quantify the risk to the CMBS market specifically?

Carlson: It’s hard to say since it depends on so many things. Because there doesn’t seem to be a way for insurance companies to completely price the risk of a terrorist attack, the impact on CMBS would depend on how many insurers would continue to offer terrorism insurance without some sort of backstop and what rates end up being charged for the coverage. The fewer insurers who offer the coverage, the higher the price and the greater the impact on CMBS.