Terrorism Risk Insurance Revision and Extension Act of 2007

Floor Speech

TERRORISM RISK INSURANCE REVISION AND EXTENSION ACT OF 2007 -- (House of Representatives - September 19, 2007)

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Mr. ACKERMAN. Mr. Chairman, on September 11, in addition to the enormous loss of human life, the value of which cannot be measured, our Nation suffered catastrophic economic losses. The attacks of September 11 resulted in $30 billion worth of insured losses, the largest catastrophic insurance loss in the history of the United States, larger than any blizzard, tornado or hurricane. As a result, insurers and reinsurers began to worry about the likelihood and the cost of a future terrorist attack.

Worrying about risk and then monetizing that risk is the key to the insurance industry, which is an essential element in a modern dynamic economy. As happened, businesses with legitimate concerns about their solvency, insurance and reinsurance firms withdrew from the market where the attack took place. As the supply of terrorism insurance rapidly decreased, New York City developers, for whom terrorism insurance was essential to secure financing for their projects, were put in a precarious position. They needed terrorism insurance to continue building, but the market for insurance simply did not have enough supply to meet their demand. Similar shortages began occurring throughout the country. In simple terms, there was a market failure.

It was out of this dilemma that the critical need to address that original version of TRIA was born. TRIA increased the availability of terrorism insurance coverage by creating a Federal backstop that would share the burden of losses caused by any future attacks of terrorism with the insurance industry.

In the wake of 9/11, we had hoped that a temporary, 3-year program would provide enough of a shield to allow the market to fully recover. By late 2005, however, the Financial Services Committee and others in Congress realized that TRIA had not resulted in as quick or as robust a recovery of the market as was originally hoped. TRIA was extended for an additional 2 years, and is currently set to expire on December 31 of this year.

Mr. Chairman, the Terrorism Risk Insurance Revision and Extension Act is a major achievement. It eliminates the distinction between foreign and domestic acts of terror. It incorporates group life insurance into the program. And, most importantly, this legislation extends TRIA for another 15 years.

Let us be clear: the enemy of business is uncertainty. This is particularly true for multi-million or multi-billion dollar real estate development projects, the kind that breathe life into our Nation. Designing, securing capital and then contracting for construction is a multi-year process, and if we want these kinds of projects to go forward during these uncertain times, there is simply no alternative to providing a long-term terrorism insurance backstop.

Extending TRIA by 15 years is not a whim. It is not an arbitrary number. A 15-year extension would allow developers to secure 10- and 15-year bonds when financing their projects and would cover the life span of construction for our Nation's most innovative and remarkable development projects.

Equally as important to our Nation's developers, insurers and reinsurers is the inclusion of the so-called ``reset mechanism'' in this legislation. This language ensures that, in the aftermath of another catastrophic terrorist attack, the affected area or areas do not experience the same capacity problems that we experienced in New York following September 11.

To be clear, however, the reset mechanism included in H.R. 2761 is not a special favor extended to New York. Under the language I worked out with Mr. Baker, representing the minority side, in the event of a terrorist attack with losses of $1 billion or greater, the deductibles for any insurance company that pays out losses due to the event immediately would lower to 5 percent, while the nationwide trigger for any insurer for any future event drops to $5 million.

Mr. Baker and I also reached agreement on my proposal to enable the Secretary of the Treasury to aggregate the total losses for two or more attacks that occur in the same geographic area in the same year, if the Secretary so chooses, so that if the total insured losses for those events are over $1 billion, the reset mechanism would be triggered. Permitting the Secretary of the Treasury to aggregate the losses of two or more attacks in the same year is absolutely essential to protect our Nation's developers, insurers and reinsurers from a scenario in which the same area suffers a loss of $1 billion in insured losses, either from two or more medium-scale attacks or from one large-scale attack.

The reset language is a true bipartisan compromise with the minority, accommodating a vast number of their concerns, and one in which I think Members of both sides should be very pleased. The new language simultaneously addresses the need to boost capacity in our Nation's highest risk areas, while recognizing that in case America suffers another catastrophic terrorist attack anywhere in this Nation, capacity shortages could be expected not only in the geographic area surrounding the site of the attack but also, quite possibly, throughout the Nation as a whole.

The chairman has asserted that he would accommodate the needs of those who have complained about the openness of the process, which I assure everybody is open. And as the leader of the conference, when the House goes into conference on this matter, Mr. Chairman, could you give us your assurance that this bill will come back in the kind of form that we will not have an issue?

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