Reauthorizing terrorism risk insurance is essential
Failure to pass legislation that reauthorizes this critical program could have dire consequences
In a few short weeks, Congress will return to Washington for a short time to finish a few “must-do” items before the close of the year. Chief among these priorities is a budget for the upcoming months, but several smaller pieces of legislation require passage before the ball drops on New Year’s Eve.
One of the most important is to extend the Terrorism Risk Insurance Act, or TRIA. While this may not have been a hot topic on the campaign trail, failure to pass legislation that reauthorizes this critical program could have dire consequences in the event of a large-scale terror attack here in the United States.
Following the September 11th terrorist attacks, businesses across the country struggled to access insurance against the risk of terrorism. Plans became costly or nonexistent, and there was a great deal of uncertainty in the economic development community.
The Real Estate Roundtable found that, in the year following the attacks, over $15.5 billion worth of real estate projects were either canceled or stalled due to the decline of available terrorism insurance. This phenomenon was not confined to New York and Washington, where most attacks had occurred. Projects in 17 states were impacted.
Originally passed in 2002, TRIA acts as a government-backed stopgap in the case of a major terrorist attack. Its fundamental goal is to ensure that businesses have access to terrorism insurance, so that in the event of an attack, construction projects can proceed, businesses of all sizes can remain open, and commerce does not come to a screeching halt.
TRIA, a public-private partnership to safeguard the availability of commercial terrorism insurance, is not a corporate giveaway or a subsidy, nor is it a mechanism for supplanting the private sector in the insurance marketplace.
TRIA was reauthorized in 2005 and again in 2007, with some minor modifications. Without congressional action, TRIA will expire on Dec. 31.
The consequences of inaction could be costly. A report from Marsh & McLennan finds that the result will be “increased pricing and limited capacity [for terrorism insurance], especially for risks in the central business districts of major cities.” The RAND Corporation found that eliminating TRIA “could increase federal spending by $1.5 billion to $7 billion for terrorists attacks with losses ranging from $14 billion to $26 billion” because direct federal disaster assistance would take the place of a government backstop.
As such, it is absolutely critical that Congress reauthorize TRIA for as long as possible, with as few changes as possible. Private business, real estate agents, economic development companies and insurers need certainty for the long term.
The New England Council appreciates the efforts of Rep. Michael Capuano, D-Mass., who last year introduced legislation to extend TRIA for 10 years as-is, as well as Senators Elizabeth Warren, D-Mass., and Jack Reed, D-R.I., both of whom voted for a responsible seven-year reauthorization bill in the Senate Banking Committee earlier this year. A multi-year reauthorization with minimal changes – in the fashion of these bills – best suits the needs of all parties involved.
It’s time for Congress to pass legislation to reauthorize TRIA and provide certainty to the American people that, in the case of a terrorist strike, the government stands prepared to help the economy recover.
James T. Brett is president & CEO of The New England Council.