Coalition to Insure Against Terrorism urges U.S. Congress to pass bill extending TRIA

With less than five weeks before a United States government backstop for terrorism insurance expires, a group of companies and industry associations is calling on elected officials to come to an agreement on a law that extends the Terrorism Risk and Insurance Act.

The Coalition to Insure Against Terrorism recently announced it met last week with leaders from the U.S. Congress to “urge them to move quickly to reauthorize” TRIA, a 12-year-old law that requires commercial insurers in the U.S. to cover losses in incidents which are “certified” by the federal government as terrorist acts. TRIA, which expires Dec. 31, also requires the U.S. government to pay a portion of a carrier’s insured losses that exceed the carrier’s deductible.

If the law is not extended, terrorism insurance “would be less available to businesses of all sizes,” the Insurance Information Institute warned last September.

In July, the Senate passed a bill that — if approved by both the House of Representatives and President Barack Obama — would extend TRIA from the end of this year until 2021. However, before a bill is sent to the president, a conference comprised of members of both houses would have to work out any differences between the House and Senate versions of the bill.

Currently, in order to trigger TRIA coverage, a terrorist attack would have to result in aggregate losses to the insurance industry of more than $100 million, Risk and Insurance Management Society (RIMS) Inc. noted in a report published in 2013.

The House of Representatives Committee on Financial Services is proposing to increase that trigger to $500 million, in the TRIA Reform Act of 2014. That bill has yet to be put before the full house for a vote but would extend TRIA to 2019 and has several differences from the Senate version.

Currently, RIMS notes, there is a deductible, to insurers, of 20% of their annual direct earned premiums from commercial P&C lines, for the federal backstop for terrorism insurance. Once that deductible is exceeded, the federal government covers 85% of the insurer’s loss above the deductible, until the total losses are $100 billion.

Both the House and Senate are proposing to decrease the federal government’s share to 80%, but one Republican suggests the Senate version goes far enough.

If the Senate version were to be passed into law, “it would make TRIA a de facto permanent obligation of the taxpayers who are already burdened with unsustainable levels of debt owing to other Washington policies and programs,” wrote Jeb Hensarling, the Republican chairman of the House financial services committee, in a recent column in the Washington Times. “The House bill puts the Terrorism Risk Insurance Act back on track as a federal backstop against the most damaging acts of terrorism, while restoring the market discipline to adapt, properly price, or innovate in the delivery of private terrorism insurance.”

Hensarling added there is a need for a federal backstop “against those catastrophic acts of terrorism that cannot be reasonably modeled or mitigated and whose size truly impacts our economy. However, today there is more capacity within insurance and reinsurance industries to cover far greater portions of this risk.”

The Coalition to Insure Against Terrorism includes several associations, such as the Associated General Contractors of America, the Building Owners and Managers Association, the U.S. Chamber of Commerce and the Securities Industry and Financial Markets Association. Individual firms who are CIAT members include railway firm CSX Corp., Campbell Soup Company, United Airlines and Citigroup Inc.

“Time is running out,” CIAT stated in a release Nov. 20. “CIAT members strongly encourage congressional leaders to listen to the employers, security experts, economic analysts and other experts who are underscoring how critical the program is to America’s economic stability and security. Congressional leaders must immediately come together to enact a long-term reauthorization of TRIA before it expires on December 31.”