U.S. House Passes TRIREA

Following is a press release from the United States House of Representatives Financial Services Committee Regarding the passage of H.R. 2761, also known as the Terrorism Risk Insurance Revision and Extension Act of 2007 (“TRIREA”). 

As reported by the Associated Press in the news article included below, the Bush Administration has recommended an ultimate veto of TRIREA and has stated its opinion that the federal government should not support efforts to expand its role in the terrorism insurance business.

Should you have any questions or comments, please do not hesitate to contact this office.

 

House of Representatives Passes Terrorism Risk Insurance Revision and Extension Act

Washington, DC – The U.S. House of Representatives today passed H.R. 2761, the Terrorism Risk Insurance Revision and Extension Act of 2007 (TRIREA), by a vote of 312 to 110.  The legislation will extend the Terrorism Risk Insurance Act (TRIA) for fifteen years and help spur the further development of a private market for terrorism risk insurance.  After the 9/11 terrorist attacks, many insurance companies excluded terrorism events from their insurance policies.  As a result, Congress passed TRIA as a three year temporary program in 2002, which created a federal backstop to protect against terrorism related losses.  In 2005, Congress extended the program for two additional years. TRIA is now set to expire at the end of this year unless Congress acts again to extend the law. 

“TRIA has helped make terrorism insurance available and affordable to businesses, particularly those in our major urban areas. Improving and extending this program will help spur America’s continued economic development by providing certainty that terrorism insurance will be available for years to come,” stated Congressman Mike Capuano.

“This legislation is essential to the continued growth and development of American cities and to provide needed protections for those who work, live and invest in downtown areas,” said Frank.  “This is a matter of national security and we cannot allow murderous thugs to define where we should build, where we should live and where we should work.”

Since its enactment, TRIA has ensured the availability of affordable terrorism risk insurance in the marketplace and thereby fostered continued urban development and real estate development in the United States.  While the TRIA program has successfully kept terrorism insurance affordable, the President’s Working Group on Financial Markets’ most recent report concluded that a private market for terrorism reinsurance is virtually nonexistent – especially with regard to nuclear, biological, chemical, and radiological (NBCR) acts of terrorism.  The Terrorism Risk Insurance Revision and Extension Act of 2007 (TRIREA) includes provisions to:

·         Extend TRIA for 15 years with current co-payments and deductibles for conventional terrorism acts;

·         Expand TRIA’s “make available” requirement to include NBCR coverage;

·         Change TRIA’s definition of act of terrorism to include acts of domestic terrorism;

·         Set the program trigger at $50 million;

·         Add group life insurance to the lines of insurance for which terrorism coverage must be made available;

·         Decrease deductibles for terrorist attacks over $1 billion and decrease the trigger after such events; and,

·         Continue to require studies of the development of a private market for terrorism risk insurance.

The House today also adopted Chairman Frank’s manager’s amendment which clarifies the certification process for acts of NBCR terrorism and the definition of NBCR terrorism to allow Treasury to distinguish between conventional and NBCR losses arising from the same act.  The amendment also selects the Consumer Price Index for All Urban Consumers for indexing to inflation the dollar amounts used in TRIA.  Additionally, the amendment applies the existing reset mechanism to acts of NBCR terrorism to provide relief for insurers who are being required to offer NBCR coverage for the first time.

H.R. 2761 was introduced in the House on June 18, 2007 and is sponsored by Rep. Capuano and Chairman Frank.  The House Committee on Financial Services passed H.R. 2761 on August 3, 2007.

 

From the Palm Beach Post, September 17, 2007

Veto Threat for Terror Insurance
By DEVLIN BARRETT
Associated Press Writer

WASHINGTON — The White House threatened Monday to veto a bill that would add 15 years to a post-Sept. 11 government insurance program which supporters say is critical for major projects like the new World Trade Center.

The Terrorism Risk Insurance Act, or TRIA, was one of a series of bills passed by Congress in the wake of the 2001 attacks. It is due to expire this year, and the House of Representatives had planned to vote this week on a 15-year extension.

If the current version of the bill reaches President Bush, his advisers will recommend a veto, the White House Office of Management and Budget said in a statement Monday.

The Bush administration said the government should get out of the insurance business in the near future and end the TRIA program, which is essentially a backstop mechanism to ensure terrorism insurance is available and affordable for major projects and buildings.

“The administration strongly opposes efforts to expand the federal government’s role in terrorism reinsurance. The most efficient, lowest cost, and most innovative methods of providing terrorism risk insurance will come from the private sector,” budget officials wrote.

“I strongly disagree,” said Rep. Peter King, R-N.Y. “TRIA is absolutely essentially, and we will continue to support it and work for it one step at a time.”

Businesses, particularly in New York, claim that without the program they will not be able to get insurance coverage for nuclear, biological, chemical, and radiological attacks, and some local officials fear without the government program they may not even be able to rebuild the World Trade Center site.

If buildings can’t be insured, banks may not lend money to build them, insurance groups argue.

The current program provides a federal insurance backup for catastrophic losses suffered in a terrorist attack, which the insurance industry says is needed because such attacks are so expensive and hard to predict. Under the bill headed for a House vote, the program can only be triggered when the amount of property and casualty losses reach $100 million.

The White House is worried over the potential long-term cost of the legislation, noting that a 10-year version could cost more than $10 billion, according to one estimate.

Sen. Charles Schumer, D-N.Y., charged the veto threat “is putting ideology ahead of economic growth.”

The terrorism insurance program, Schumer said “is essential to construction and growth in many of our large cities. It is particularly needed now as the economy softens.”