By Peter Schroeder - 04/22/14 11:38 AM EDT
Uncertainty over whether Congress will extend a federal backstop for terrorism insurance is making that coverage more expensive and harder to find, according to a new report.
The study, which is being touted by industry groups, says the federal support provided by the Terrorism Risk Insurance Act (TRIA) has allowed insurance companies to protect businesses against the financial risks of a terrorist attack.
While lawmakers from both parties have co-sponsored legislation extending the program, the central question for the industry is what sort of reforms lawmakers will attach to the program.
Earlier this month, a bipartisan group of senators unveiled a compromise extension of the terrorism insurance program that would keep it going for another seven years but that would require private companies to shoulder a larger share of the costs should an attack occur.
Sens. Charles Schumer (D-N.Y.), Dean Heller (R-Nev.), Mark Kirk (R-Ill.) and Mike Johanns (R-Neb.) teamed up on the bill, and the Senate Banking Committee hopes to take it up in the coming weeks.
The Obama administration has also called for another extension. The president's working group on financial markets, which consists of top regulators, said Thursday the law has lowered costs for terrorism insurance and made them more stable. They also found that the market for terrorism insurance has tightened as the deadline nears and that the private market is not equipped to handle terrorism coverage on its own.
Some conservatives have qualms with the program, noting that it was originally created to help an insurance industry overwhelmed by the massive losses from 9/11 and has been broadened with each extension.
Some Republicans, including House Financial Services Committee Chairman Jeb Hensarling (R-Texas), have suggested the program should not be extended without significant reforms. But an extension is a top priority for other GOP lawmakers, particularly those in areas that are at a higher risk for terrorism. Three different bills extending the program at varying lengths and with different sets of reforms have been introduced in the House.
Extending the program has been a top priority for many major business and industry groups, which have joined forces to specifically push the matter in Washington. Major banks, sports leagues and hotel chains have joined the group pushing for an extension of that backstop, and Tuesday’s report marks the latest step in that initiative.
The study, from Marsh Risk Management Research, found that the cost of terrorism insurance would become highly volatile if Congress did not extend the program, and that the looming deadline could already be having an impact.
Furthermore, the study found that roughly two-thirds of property insurance policies set up in 2014 included clauses that would cancel terrorism coverage at the end of the year if TRIA expires, and that many companies are not prepared to offered stand-alone terrorism coverage if that occurs.