Today, the House Committee on Financial Services held a hearing on the Terrorism Risk Insurance Act (TRIA) Reauthorization Act of 2013, which was introduced by Representatives Michael G. Grimm (R-NY) and Carolyn Maloney (D-NY). The bill would extend Terrorism Risk Insurance Program for five years, through December 31, 2019. TRIA was first authorized in 2002, and is scheduled to expire on December 31, 2014. Reps. Maloney, Grimm, Peter King (R-NY), and Michael Capuano (D-MA) testified in support of the extension.
"Today's hearing has jumpstarted a critical debate in Congress on TRIA. If TRIA expires, not only will we expose our nation to great financial risk, we could see the availability of terrorism insurance diminish. This would put large construction projects on hold and leave properties like skyscrapers, sports stadiums, and key infrastructure uninsured. It would be irresponsible to allow TRIA to lapse, which is why Rep. Maloney and I have introduced the TRIA Reauthorization Act to extend this vital program for another five years," said Rep. Grimm.
"Our country can't afford to lose the Terrorism Risk Insurance Act (TRIA). If Congress doesn't extend TRIA, major construction projects in New York, Boston, Chicago, LA and more will stop. If Congress doesn't extend TRIA, Disney World, sports stadiums, and local infrastructure projects, won't be able to get insurance. Major, essential economic engines in our country will grind to a halt if Congress does not extend TRIA. Hundreds of thousands of jobs across the country will be lost. That's why Congressman Grimm and I are fighting so hard to pass our bill to make sure TRIA remains in place for at least another 5 years," said Rep. Maloney.
"In the wake of the September 11, 2001 terrorist attacks, terrorism risk insurance disappeared from the marketplace. As a result, economic activity stalled, contributing to growing job losses and increasing hardship. The Terrorism Risk Insurance Act brought terrorism risk insurance back to the market, helping to re-start the engine of job creation and restore economic growth. The terrorism risk insurance mechanism established by TRIA has performed this function effectively and efficiently for more than a decade, and numerous studies have shown that terrorism risk coverage would once again disappear from the market without it. CIAT fully endorses the efforts of Reps. Grimm and Maloney to extend this legislation and continue its important contribution to economic vitality and national security," stated Martin DePoy, Coalition to Insure Against Terrorism Steering Committee Coordinator.
Before the terrorist attacks of September 11, 2001, terrorism coverage was included in general insurance policies. After September 11th, terrorism insurance became very expensive, or unavailable. Congress responded by passing the Terrorism Risk Insurance Act (TRIA) of 2002 which created the Terrorism Insurance Program -- a program in which the government would share some of the losses with private insurance in the event of another attack.
An individual act of terrorism must be certified jointly by the Secretary of the Treasury, Secretary of State, and Attorney General, and losses must exceed $5 million. The federal government shares in an insurer's losses only if the insurance industry's aggregate insured losses from certified acts of terrorism exceed $100 million, throughout the entire industry. The amount of the government share varies depending on the size of uninsured losses.
Each insurer is responsible for paying out a certain amount in claims--known as its deductible--before receiving federal coverage. An insurer's deductible is proportionate to its size, equaling 20% of an insurer's annual direct earned premiums for TRIA-covered lines of insurance. Once the $100 million aggregate loss threshold and 20% deductible are passed, the federal government is to cover 85% of each insurer's losses above its deductible up until the amount of losses totals $100 billion. The $100 billion figure is total losses not just federal assistance.
In addition, TRIA contains important taxpayer protections. In the event of government losses due to an act of terrorism the Treasury is able to recoup losses by applying a surcharge to future insurance premiums to repay these losses over time.
If TRIA were to lapse at the end of 2014 billions, possibly trillions, in commercial loans that are required to have terrorism insurance would be in technical default and could be called in, creating a massive financial and economic disruption.
The bill has over 75 bipartisan cosponsors. The nine original cosponsors include: Reps. Michael Grimm (R-NY), Carolyn Maloney (D-NY), Pete Sessions (R-TX), André Carson (D-IN), Peter King (R-NY), Gregory Meeks (D-NY), Dennis Ross (R-FL), and Timothy Bishop (D-NY).