Insurance carriers and agents are applauding a House committee vote advancing a bipartisan measure to renew the federal terrorism reinsurance program.
The House Financial Services Committee unanimously (57-0) passed the Terrorism Risk Insurance Program Reauthorization Act (H.R. 4634), which would reauthorize the program until 2017. The backstop program is currently due to expire on Dec. 31, 2020.
Since its initial enactment after the September 11, 2001 terrorist attack, TRIP has undergone additional reauthorizations in 2005, 2007 and 2015, with reforms that have increased private sector involvement.
Rep. Maxine Waters (D-Calif), chairwoman of the committee, noted that the measure that now goes to the full House for consideration is supported by members from both parties and more than 300 organizations.
“Nearly two decades after TRIA was enacted, TRIA has thankfully never been triggered, and the program is working as intended, effectively protecting our economy from the costs of a terrorist attack and providing security for many of our nation’s hospitals, stadiums, schools and small businesses,” she said.
“Without a reauthorization, the program would expire at the end of 2020, but we could experience the harmful effects of a failure to reauthorize as soon as January of 2020.”
John Doyle, president and chief executive officer for insurance broker Marsh, warned of the economic and insurance market effects if TRIA is not renewed.
“Absent a public-private backstop for large-scale terror attacks, many industries would struggle to find sufficient or affordable insurance coverage. Economic activity could be slowed and large workforces could be at greater risk,” Doyle told the committee.
He said as the expiration of the current program nears, continued uncertainty about its fate will affect the availability and nature of insurance coverage. “That, in turn, could affect companies’ decision-making processes about hiring and investing, potentially sending ripple effects through the economy,” he warned.
Doyle said there are already signs of the uncertainty having an impact on policies that extend beyond 2020, with some insurers not offering terrorism coverage beyond the expiration of TRIA or seeking to raise prices to cover the additional risk to their portfolios.
“Without a decision to reauthorize or extend TRIPRA, we expect to see more sunset provisions in policies and higher costs as we get closer to December 31, 2020. In some cases, state-run markets of last resort, which must accept the risk, may be the only option for coverage,” he said.
The industry urged lawmakers to act soon and not wait until next year’s deadline.
“This legislation is vitally important to maintaining the strength of the commercial property/casualty insurance market and would provide much needed stability to the U.S economy,” said Wyatt Stewart, senior director for federal government affairs at the Independent Insurance Agents and Brokers of America (Big “I”).
“TRIA provides the vital economic protections against acts of terrorism that businesses of all sizes rely upon. The risk of terrorism is still very real, and the TRIA program is still needed to promote economic stability both before and after an attack. We urge the full House to take up and pass this bill quickly,” said Nat Wienecke, senior vice president at the American Property Casualty Insurance Association.
“The TRIA program has been an essential part of preserving our national economic security since it was established in the wake of the 9/11 attacks,” said Jimi Grande, senior vice president of government affairs for the National Association of Mutual Insurance Companies. “The presence of the program has ensured a competitive marketplace for commercial terrorism coverage that is needed across all industries and all areas across the country.”
In addition to providing for a seven-year reauthorization period, the bill would also require a government report on cyber terrorism risks and require biennial Treasury reporting that includes disaggregated data on places of worship.
Not everyone totally backs renewal of TRIA. The Consumer Federation of America (CFA) maintains that the program is not needed in its current form.
“We believe the program is no longer needed, and this public subsidy of the overcapitalized insurance industry should be wound down,” said J. Robert Hunter, CFA’s director of Insurance and a former Texas and federal insurance regulator “If Congress wants to extend TRIA, it should no longer be as a corporate welfare program, instead, it should require insurance companies to pay a fair, actuarially sound premium for any federal backup of private coverages that Congress authorizes.”
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