TRIA’s Progress Gives CRE Industry One More Reason for Optimism
- Jan 12, 2015
The U.S. Senate’s passage of legislation reauthorizing the Terrorism Risk Insurance Act, on Thursday, put the bill, already approved overwhelmingly by the U.S. House on Dec. 10, on a path to President Obama’s desk. The president reportedly is expected to sign the bill into law shortly.
And that’s removing one small source of anxiety for the CRE sector as the new year begins. Last summer, the Senate voted 93-4 to reauthorize TRIA for seven years, which theetically would have prevented TRIA’s expiration at the end of this past year.
The sticking point on this final vote, however, was an unrelated provision relating to the Dodd-Frank Act, one that would create a national board for licensing insurance producer, pertaining to interstate insurance sales. In the event, the Senate went home for the holidays, leaving the TRIA reauthorization languishing until the 114th Congress was sworn in after New Year’s.
As a result, TRIA did lapse at year’s end, causing consternation in the CRE and CMBS sectors. In an interview with Commercial Property Executive, Huxley Somerville, Fitch Ratings’ managing director and head of U.S. CMBS, called TRIA a vital component of the CMBS market.
In a prepared statement, CRE Finance Council president/CEO Stephen Renna said, “This quick action from the new Congress on the heels of the December fumble is a positive for the commercial real estate finance market, which was dealing with tremendous uncertainty following the program’s expiration on Dec. 31.”
CREFC described the highlights of the package as:
* A six-year reauthorization of TRIA.
* An increase in the program/event trigger from $100 million to $200 million over several years.
* The omission of language that would have treated nuclear, chemical and biological attacks discretely.
* An increase in the mandatory recoupment surcharge to policyholders to $37.5 billion, from the current $27.5 billion.
The National Association of Real Estate Investment Trusts on Thursday commended Congress for passing the bill, the Terrorism Risk Insurance Program Reauthorization Act of 2015. “Congress’ bipartisan action on TRIA this week will help ensure the continued availability of terrorism risk insurance, providing stability for the broad range of businesses of all sizes that depend on this essential coverage. We strongly urge President Obama to sign this legislation into law at the earliest opportunity,” NAREIT said.
It was essentially certain that the bill would pass, but until Thursday questions remained of how long Congressional approval would take and how for long Congress would extend TRIA, Joe McBride, an associate with Trepp L.L.C., New York, told Commercial Property Executive.
The bill’s progress is especially welcome, he said, given the diverse uncertainties, from interest rates to oil prices, facing the broader economy. And it contributes to a broad feeling of optimism about CRE as the year begins, McBride added. “This is another green light to get the engine going.”
Note: Property owners only had to worry about the risk of being in default of their loan requirements for a few days before the bill got passed and alleviated that risk.