Terrorism Risk Insurance Gets 6 More Years
New Congress picks up where last one left off.
The new Republican-led Congress passed its first bill Thursday, Jan. 8, after the Senate voted to renew a government-backed terrorism insurance program that had expired at the end of 2014.
The six-year extension to the Terrorism Risk Insurance Act (TRIA) offers plenty of comfort to ports, property developers, sports teams, and others that faced potentially staggering insurance bills without the government’s safety net, or even outright cancellation of their projects. The House passed the bill overwhelmingly on Tuesday over the objections of some small-government conservatives who had urged Washington to back away from underwriting terrorism-related risk more than a decade after the 9/11 terrorist attacks.
The program’s renewal received an unexpected boost from the tragic and deadly terrorist attack in Paris on Wednesday, when three gunmen killed 12 people at a French satirical weekly. House Majority Whip Steve Scalise (R-La.) said Wednesday that the violent events in France “remind us that terrorism remains a real threat in today’s world” and urged Senate passage.
The bill also includes an unrelated provision to make sure some post-financial crisis rules for complex financial instruments called derivatives won’t apply to commercial and agricultural companies.
Lawmakers were expected to pass the renewal in December, but didn’t get to it in the press of unfinished business before they left Washington for the holidays. The bill became mired in eleventh-hour negotiations as Congress tried to pass a spending bill to keep the government open before closing up business for 2014 in mid-December.
The program then expired on Dec. 31, despite a chorus of lobbying from football teams, ports, and real estate developers. The insurance industry had warned that policies for terrorism would become much more expensive and harder to find without government support. Some proponents even claimed that the program’s expiration threatened the Super Bowl because the stadium wouldn’t be able to hold the event if it couldn’t insure against the threat that the game would be targeted by terrorists. The NFL quickly dismissed that idea and said the game would go on.
Industries that had pushed hard to get TRIA passed last year breathed a sigh of relief that they wouldn’t have to wait in limbo any longer.
“Renewing TRIA for six years represents a major victory for the commercial real estate industry and the millions of jobs and economic growth it supports,” said Thomas J. Bisacquino, head of the industry group for commercial real estate, in a statement.
Aaron Davis, a property insurance broker in New York, said he hadn’t heard horror stories of development projects being delayed or canceled, but he’s very pleased to hear the bill is on the way to President Barack Obama’s desk.
“The industry had to scramble, frankly, from a client perspective, from a broker perspective, and a market perspective,” Davis said in a phone interview. “There is a substantial amount of confusion in the market.”
Over the past year, the program’s renewal became a target of small-government Republicans who argued the market should be able to stand on its own. At issue was whether the government should share the risk private companies take on when they agree to insure buildings and businesses against the possibility of a future terrorist attack.
After paying out a record $32 billion in claims after the 9/11 attacks, many insurers decided that the risk of terrorism was too unpredictable to cover. Congress stepped in and passed TRIA, which was meant to provide a short-term government backstop. Since then, the temporary program has been renewed three times, in 2005, 2007, and again this week.
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