Time for House to pass the Terrorism Risk Insurance Act

Democrats and Republicans are moving together to approve an important legislative priority this year – renewal of the Terrorism Risk Insurance Act also known as TRIA. Earlier this summer, the Senate voted overwhelmingly in favor of the legislation, which ensures businesses can continue to get the insurance they need to protect themselves and the nation’s economy from potentially catastrophic terrorist attacks.

But the House has yet to act. Considering TRIA’s importance to our nation’s economic security, the House should move quickly to approve TRIA reauthorization legislation so this vital program is renewed.

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TRIA is one of the nation’s most effective public-private partnerships. Since it was first enacted a dozen years ago, the program has provided insurers the confidence they need to write terrorism risk insurance. Such coverage, sadly, has become essential for more than 60 percent of U.S. businesses since the tragedy of September 11, 2001.

The program is designed to protect the federal treasury by placing the responsibility for financial recovery on the private sector in all but the most catastrophic of events.

In fact, each time TRIA was reauthorized by Congress – in 2005 and again in 2007 – taxpayer protections were strengthened. The same pattern is repeating itself this year.

The goal of TRIA is for insurance companies and the federal government to ensure that an orderly economic recovery would follow any major terrorist act. TRIA would go into effect only if the U.S. were hit with a massive terrorist attack.

If, heaven forbid, the U.S. suffered another major act of terrorism, total economic losses would have to exceed the amount lost during the September 11, 2001, attack – roughly $30 billion – before the federal government would have to pay a cent.  In addition, taxpayers would be paid back for their assistance. The TRIA law requires the government to recoup any taxpayer money it spends on the first $27.5 billion of terrorism losses. It also allows the government to recoup losses up to the program’s $100 billion cap.

Still, some of the program’s critics have argued that the program should be changed to further increase insurers’ exposure in the event of an attack.  The truth is that the industry already has plenty of skin in the game. While the industry understands the need to update the program, it’s important that lawmakers do not take steps that could hinder the industry’s ability to offer this critical coverage.

As current events unfold we are reminded that the world remains a dangerous place and terrorism is a constant threat.  A recent study made clear that allowing TRIA to expire could end up costing the government more than renewing it ever could.

The respected RAND Corporation looked at the potential cost of a terrorist attack that resulted in losses of up to $50 billion. Without TRIA in place, potential federal spending in the wake of the attack could increase from $1.5 billion to $7 billion. This would be due to a lack of adequate terrorism insurance coverage, which, in turn, would result in an increased demand for relief from the federal government.

In other words, the federal government would have to pay out billions that it would be unable to recover. Expenditures under TRIA , by contrast, would eventually be recouped.

There is bipartisan recognition TRIA is important and must be renewed. That’s because over time, TRIA has proven to be both effective and inexpensive for the taxpayer. Real estate developers, commercial property owners, universities and many other employers rely on the program to clear the way for the private market to underwrite necessary terrorism coverage. Without TRIA, terrorism insurance capacity would be substantially reduced, stifling economic growth and job creation.

Now that the Senate has acted, the House must do the same and renew the program – without unnecessary complications – before its year-end expiration.

Pusey is president and CEO of the American Insurance Association.

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