TRIA Extension Sails through Senate
- Jul 21, 2014
Last Thursday, the U.S. Senate by a 93-4 vote approved legislation to reauthorize for seven years the Terrorism Risk Insurance Act, which is otherwise set to expire at the end of December. The bill in question is the Terrorism Risk Insurance Program Reauthorization Act of 2014 (S. 2244).
“Without Congressional action, TRIA will expire at year-end, causing a cascade of negative effects for businesses and institutions of all kinds that need terrorism insurance to protect against potentially catastrophic losses,” Jeffrey DeBoer, president & CEO of The Real Estate Roundtable, said in a release. “This includes the commercial real estate sector, where owners will either go into technical default on existing loans (if they lack terrorism coverage), or be unable to obtain financing for new projects, as lenders require terrorism insurance on the loan collateral.”
An April 2014 RAND study, “The Impact on Federal Spending of Allowing the Terrorism Risk Insurance Act to Expire,” noted, among other key findings, that for terrorist attacks with losses less than about $50 billion, having TRIA in place would lead to less federal spending than if it were eliminated, Clifton (Chip) Rodgers, senior vice president at The Real Estate Roundtable, told Commercial Property Executive.
Rodgers also noted a March 2014 report from the Insurance Information Institute, “Terrorism Risk: A Constant Threat — Impacts for Property/Casualty Insurers,” which highlighted both the attack last year on the Boston Marathon and the comparatively obscure April 2013 sniper attack that nearly triggered a blackout in Silicon Valley. The III report describes the retail, transportation and energy sectors as of particular concern.
Further, the 2014 Terrorism Risk Insurance Report from Marsh called the act’s pending expiration “a key issue facing the insurance industry and organizations that buy terrorism coverage” and predicted that if the law expired, the cost of terrorism insurance coverage would become volatile.
TRIA’s passage in the Senate, Tarique Nageer, senior vice president & head of the property terrorism advisory and placement team at Marsh in New York, told CPE, “is an encouraging development, as there are now formal versions of a TRIA reauthorization bill in both the House and Senate. We hope the House moves quickly and brings their bill to a full vote. Our clients need certainty of terrorism insurance, and the sooner this is resolved, the sooner this uncertainty is removed, and clients can plan long term knowing this coverage is secured.”
In late April, Walt Mercer, executive vice president and head of commercial real estate for SunTrust Bank, wrote a guest op-ed for CPE about the need for an extension of TRIA.
Regarding this latest development, he told CPE, “We are delighted that the U.S. Senate has passed this … critical legislation that will preserve and create jobs throughout the real estate industry. It will be equally important for the House to complete their version … and that the final legislation is passed by the end of the year to keep the funds flowing to sustain the jobs in our industry.”