It seemed like a slam dunk.
However, since 12:01 am on January 1, 2015, terrorism risk in the US has not been covered by TRIA. Congress adjourned December 16, 2014 without coming to terms with a renewal of the terrorism risk backstop, in place since November 26, 2002. Not that they didn’t try: the House passed bill S. 2244, which would extend TRIA through December 31, 2021 and would revise program requirements.
Meant as a temporary backstop, TRIA has become a stabilizing force for the insurance market. The plan then was to decrease federal support and eventually turn terrorism risk over to the market. However, as acts of terrorism increase, insurers point to the need for continued federal support.
The new extension would raise the trigger from $100 million to $200 million. Yet despite bipartisan support, TRIA was left to expire. At issue — an unrelated policy rider moving to create a federal registry to license all insurance agents and brokers.
The expiration has caused significant ripple effects across the country. Loan defaults are feared as property owners aren’t able to meet the terrorism insurance requirements on their mortgages. Real estate sales could be on hold as financial institutions become nervous about the lack of coverage. While many insurers do cover terrorism, TRIA’s expiration allows them to invalidate coverage without the federal backstop.
Also, over 60 percent of businesses have terrorism coverage. Without TRIA, companies will be exposed to large, door-closing losses should a terrorism attack occur.
Congress has taken up the issue again today in an attempt to get swift passage. Stay tuned.