The House will move quickly this week to reauthorize a terrorism insurance program that expired at the end of the year.
Approval can’t come soon enough for builders, insurers and lenders, who were surprised when the Senate failed to re-up the program before leaving Washington in December.
The House added the program, known as the Terrorism Risk Insurance Act, or TRIA, to the list of legislation to be considered on an expedited basis this week.
TRIA previously passed the House 417-7 in December, but was held up by Sen. Tom Coburn in the Senate over an objection to a separate measure. Extending the measure, which was first passed in 2002 as a temporary program in response to the insurance losses from the Sept. 11, 2001, attacks, also has broad support in the Senate.
“The only reason TRIA expired is because the then Democrat-controlled Senate failed to even bring that bipartisan bill up for a vote. The House will once again lead on this issue and bring up the same bipartisan bill that 196 House Democrats voted for less than a month ago,” said House Financial Services Committee Chairman Jeb Hensarling, R-Texas.
Critics of the program, who regard it as a subsidy for business, have noted that the sky hasn’t fallen in the six days that TRIA has lapsed, despite some warnings of dire consequences. In one extreme example, the television show “Fox and Friends” reported in December that the expiration of TRIA could lead to the cancellation of the Super Bowl over terrorism risk concerns, a suggestion that was rebutted by the National Football League.
Industry representatives say problems are cropping up in commercial insurance markets, however, which are being held together by the expectation that Congress will act quickly to renew the program.
“Clearly Congress understands the need and urgency to get things done quickly,” said Martin DePoy, a spokesman for the Coalition to Insure against Terrorism, a group representing policyholders.
“It’s given insurers some confidence and comfort that this will get done,” DePoy said, adding that “what we are hearing is that this gives them a little comfort to continue on with policies in their current form.”
Industry representatives said insurers have a grace period of 30-45 days before they would be forced to consider canceling contracts, exposing businesses to risk and jeopardizing funding for projects. Businesses required by their creditors to be insured against terrorism also have a period of time to demonstrate that they have coverage.
That gives Congress a window to act. Majority Leader Mitch McConnell has said the Senate will act on TRIA early in the new Congress, but the question facing insurers and policyholders is how quickly both parties and chambers can act.
TRIA provides a backstop for insurers who provide coverage against terrorism-related losses, requiring the government to recoup payouts later on. The program has never paid out for losses, but many in the insurance industry say that it’s essential for building projects and events that otherwise would be uninsurable against the risk of terrorism.
In the early days of 2015, the lack of a government backstop has had a muted impact, casting only a few business arrangements into doubt.
Minneapolis officials acknowledged to a local ABC affiliate that the Minneapolis Convention Center and other public buildings are no longer insured against terrorism.
“There are probably 1.5 million businesses that had terrorism coverage prior to 2014, and we believe about about 1 million of those lost coverage at the end of the year,” DePoy said, with another half million set to lose coverage.
For the most part, policyholders and insurers can wait out the next few weeks, as long as it’s clear that Congress will act.
“If this drags on into February or March, I think you’ll start to see this slow burn start to intensify,” one industry lobbyist said. But for now, he added, he has confidence that Congress will act to avert a worse outcome.
If it had not been merely a “fluke of politics, or the calendar” that stopped reauthorization, he said “it would have been much much different” for the industry.
But that isn’t true for the worker’s compensation market, in which policies are constantly coming due and being reauthorized.
Worker’s compensation contracts in all states make it impossible to exclude terrorism risk coverage, meaning that in many cases insurers may not be able to re-up policies or may make them much more expensive.
“As policies begin to expire during the course of 2015, insurers will look at each and every one of them one by one and decide whether to renew,” said Robert Hartwig, the president of the Insurance Information Institute, an industry group.
