On December 10, 2014, the United States House of Representatives voted to extend the Terrorism Risk Insurance Act (“TRIA”), a federal law offering insurers coverage against property damage caused by terrorism. The measure did not pass the Senate; however, so the program will expire December 31st.
Senator Tom Coburn from Oklahoma held up legislation that would have renewed the TRIA for six years. His objections stemmed from concerns over the underlying policy and a plan to establish the National Association of Registered Agents and Brokers Reform Act, a proposed regulatory body that would be tasked with supervising agents and brokers. Coburn argued that the renewal of the TRIA still put the majority of financial risk on the taxpayers.
The House’s proposed TRIA extension included a proposed amendment to the Dodd-Frank Act,increased companies’ co-payments from 15 percent to 20 percent, and also increased the threshold of required damages. If the resolution had been passed, the government would be required to reimburse companies once owner losses reached $200 million, which is an increase from the $100 million threshold in the current TRIA program.
Most major businesses and the property and casualty insurance industry vocalized support for TRIA renewal. On December 14th, over fifty major American business organizations sent a letter to senators, urging them to pass the TRIA without other amendments in order to ensure “economic resiliency in the event of a terror attack.”
Because the TRIA is set to expire on December 31st, insurers will have the right to cancel terrorism policies after January 1, 2015. Industry experts believe insurers will do so to insulate themselves from the risk of insolvency in the event of another major terrorist attack. Many insurers believe that without government backup, offering to cover damages caused by terrorist attacks is far too risky.
The Property Casualty Insurers Association of America (“PCI”) issued a statement, saying that is “unconscionable” that the Senate adjourned without reauthorizing the TRIA. The associated stands behind its claim that the TRIA plays “a vital role in our national economic security.”
Now the TRIA can only be renewed after the 114th Congress is sworn in in 2015.
PIB Law represents national banks, retailers, reinsurers, insurers, mortgage lenders and financial services companies from its offices in New Jersey, New York City, Philadelphia, Boston, San Antonio, and Chicago. For more information on reinsurance and insurance issues, contact PIB Law at 908-725-9700.