Washington – To the relief of the property and casualty insurance industry, the U.S. House on Wednesday approved legislation that would reauthorize a program that serves as a backstop for insurers faced with large claims resulting from a terrorist attack.
American Insurance Association President Leigh Ann Pusey urged the Senate to act quickly on the Terrorism Risk Insurance Act, or TRIA.
“Without the continuation of the program the marketplace is jeopardized,” Pusey said.
The House, which voted 416-5 to reauthorize TRIA on Wednesday, had approved an extension of the program in the last Congress.
But the Senate failed to act, stymied by a procedural hold placed on the bill in the final days of the session, so TRIA expired on Dec. 31. That means property and casualty policies that renew after that date may exclude terrorism coverage – or offer it at a high cost.
“Without such a program, taxpayers will face less financial risk, but some businesses will lose or drop their terrorism coverage and economic activity might slow if a large terrorist attack occurs,” said a Congressional Budget Office report released this week.
The terrorism risk program, a priority for lobbyists for the Travelers and The Hartford, was established after the 9-11 attacks resulted in more than $40 billion in claims, provoking reinsurers to withdraw from the markets. Without reinsurance, primary insurance companies were forced to exclude terrorism coverage from their policies.
So Congress stepped in by approving the TRIA that, in effect, made the federal government a reinsurer for terrorism coverage. So far it has not had to pay on any claims.
Real estate, transportation, construction, energy, utilities and sports stadiums are considered the most vulnerable to losses from an attack.
The House bill changes the program slightly, raising the trigger for the federal backstop from the current $100 million per incidence to $120 million starting in 2016. The bill reauthorizes TRIA for six years.
All members of the Connecticut delegation to the House or Representatives voted for the bill, except one of the legislation’s biggest boosters – Rep. John Larson, D-1st District, who was absent.
Larson went to Hartford to witness the swearing in of his brother, Tim Larson, to the Connecticut state Senate and was delayed getting back to Washington.
Larson issued a statement, however, saying in part, “I was pleased to see TRIA at the top of the agenda for the 114th Congress and applaud it’s passage in the House today…While I remain disappointed that Congress could not send this to the President’s desk last month, I urge swift passage in the Senate on this vital measure.”
Not everyone applauded the reauthorization of the terrorism risk insurance program.
Taxpayers for Common Sense, a budget watchdog group, says the federal government should reform the program, shifting some of its costs back to insurers. It also said some insurance companies were willing to step into the market when TRIA expired.
“Clearly there will be impacts with the expiration of the program,” said Taxpayers for Common Sense President Ryan Alexander. “There may be some price and availability issues, but it does appear the market is responding in a predictable and good way.”