(To read more on the debt and equity markets, click here.)
WASHINGTON, DC-Congress has taken another step toward putting an extension of the Terrorism Risk Insurance Act of 2002 in place now that the US House of Representatives has passed HR 4314, calling for the delay of TRIA's impending Dec. 31 expiration date to Dec. 31, 2007. Yesterday afternoon's passage of the Terrorism Risk Insurance Revision Act of 2005, which also incorporates a handful of amendments to the original, came about three weeks after the US Senate passed its version of extension legislation, the Terrorism Risk Insurance Extension Act of 2005, or S 467. For previous coverage, click here.
Leaders from a wide range of industries--including real estate, mortgage banking and insurance--have long advocated an extension of TRIA. The program was put in place in response to the Sept. 11 terrorist attacks that led to a sudden absence in availability of terrorism coverage and a severe blow to the national economy, as development projects came to a halt and future construction endeavors were put on the back burner. TRIA established a federal backstop guaranteeing that the government would cover payouts, beyond the initial deductible, up to $100 billion of insurers' liability in the event of future devastating terrorist attacks.
"We've long said that a continued federal role is key to assuring that terrorism insurance remains available to businesses that need the coverage," Claire Wilkinson, vice president for Global Issues at the Insurance Information Institute, tells GlobeSt.com. "The private insurance market is simply not in a position to take on sole responsibility for economic fallout of a future attack. Estimates suggest that insured loss from a future attack could result in hundreds of billions in losses."
Both the House and Senate versions of the extension bill incorporate a change in the programs terms that would raise the $5-million minimum required for the initiation of federal coverage to $50 million in 2006 and up to $100 million in 2007. Unlike the Senate bill, however, the House bill adds to the list of eligible lines of coverage, such as group life insurance, and the coverage of damage done by domestic terrorist attacks. The amendments exclusive to the House's version of the TRIA extension go against recommendations from the US Department of the Treasury and the White House.
"Taxpayers' exposure should be substantially mitigated by reducing lines of coverage subject to the federal backstop and by increasing the insurance industry's effective exposure," according to a statement of administration policy from the Executive Office of the President, issued following the House's vote. "The administration strongly opposes the House amendment to S 467, as it does not meet these reform objectives. Instead of scaling back the federal backstop, the House amendment to S 467 expands the program by including group life insurance as a covered line and by adding domestic terrorism coverage to the program, among other changes. The private market for these lines of coverage has remained robust and competitive, absent a federal backstop, since TRIA's inception. Adding new lines to the federal reinsurance backstop sends the wrong signal to the marketplace, which should be encouraged to find new ways to diversify the risks of doing business."
Many groups, such as the Coalition to Insure Against Terrorism, have expressed support for both bills, advocating various aspects of both versions, but also pointing out the need for further changes. "We're hopeful for a package that contains comprehensive coverage, including property and casualty insurance, and general liability," CIAT Steering Committee coordinator Marty DePoy tells GlobeSt.com. "Additionally, an issue that is a troubling one for the policy-holding community is the absence in the market of nuclear, chemical, biological or radiological-related terrorism coverage."
Now that the House and the Senate have settled on their respective TRIA extension bills, the two chambers will meet in committee to craft a single version of the legislation. "We're hopeful that Congress can get a bill out of conference within the next couple of days, prior to the end of the previous expiration," DePoy says.
Other groups have also expressed a desire for an expeditious passage of an extension. "We look forward to continuing our work with Congress so that final TRIA legislation can be presented to the President for signature before the end of the year," says Kurt Pfotenhauer, the Mortgage Bankers' Association's senior vice president of government affairs.
"Now that the Senate and the House have acted, we urge Congress to swiftly resolve any differences between the two versions of the legislation and to send a final measure to the President for his signature," adds Real Estate Roundtable president and CEO Jeffrey D. DeBoer. "With terrorists increasingly targeting economic and 'soft' civilian targets, there is no time to lose in making sure America has an effective terrorism risk insurance program in place when the New Year begins on Jan. 1."
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
