Terrorism insuranceUncertainty over terrorism insurance act’s renewal upsets industry
The Terrorism Risk Insurance Act (TRIA) is set to expire at the end of this year unless Congress renews the program, which will likely include reforms required by House Republicans. Congress passed TRIA in 2002 after the 9/11 attacks to encourage insurance companies to continue terrorism coverage as part of commercial policies after many feared that doing so would lead to greater financial loss should another terror attack occur.
The Terrorism Risk Insurance Act (TRIA) is set to expire at the end of this year unless Congress renews the program, which will likely include reforms required by House Republicans. Congress passed TRIA in 2002 after the 9/11 attacks to encourage insurance companies to continue terrorism coverage as part of commercial policies after many feared that doing so would lead to greater financial loss should another terror attack occur. The current bill orders the federal government to cover 85 percent of losses incurred from a terrorist attack if the total insurance industry losses range between $100 million and $100 billion. If insurers’ losses remain under $27.5 billion, the federal government would recover its contribution via surcharges on all property and casualty policies, while losses totaling more than $100 billion would be covered by the affected policyholders.
Should House Republicans insist on reforms to TRIA, a six-month extension to the current bill may be authorized, which will then allow Congress to debate the reforms before a final bill is presented for vote. A six-month extension, however, creates uncertainty among policyholders and insurance companies given that insurance contracts are set for at least a year. “People are very worried that if they can’t come together and get this done that Congress may choose to punt, to kick the can,” said Nat Wienecke, a senior vice president for federal government relations for the Property Casualty Insurers Association of America.
The Washington Examiner reports that In September, Representative Paul Ryan (R-Wisconsin) at the Financial Services Roundtable predicted that TRIA would not pass the House until reforms were made to the bill, but a short-term reauthorization bill may be an option. “The way I see this coming down is, it’s going to get extended,” Ryan said. “The question is: Do you do reforms now and negotiate, or do you just do a short-term extension into next year and then do negotiations?” Several House Republicans including House Financial Services Committee chairman Jeb Hensarling (R-Texas) want to increase the share of potential losses that would be covered by the private sector.
To cope with the uncertainty of a TRIA reauthorization, some insurance companies have noted on their contracts that policyholders could lose terrorism coverage if TRIA is not renewed or if reforms dramatically alter the bill.
