Posted on 28 May 2013 by Neilson
Efforts to keep the federal Terrorism Risk Insurance Program from expiring at the end of 2014 may be gaining traction on Capitol Hill. A third bill to extend the program has been introduced in the U.S. House of Representatives and already has the bipartisan support of 19 co-sponsors.
The latest bill, the Terrorism Risk Insurance Program Reauthorization Act of 2013, would extend the program through 2024. Rep. Michael Capuano, D-Mass., and Rep. Peter King R-N.Y., introduced the bill on May 23. The Capuano-King bill would extend the program without any significant changes.
A separate bill introduced earlier this month by Rep. Bennie Thompson, D-Miss., would also extend the program through 2024, but it would designate the U.S. Department of Homeland Security and not Treasury as the "lead" agency in the certification process.
In February, bipartisan group of House lawmakers introduced legislation that would give the program a five-year extension.
The program acts as a financial backstop for the property/casualty industry to help drive down the cost of terrorism coverage. For individual events to be covered under terrorism insurance policies, covered losses would have to exceed a minimum of $5 million. Federal funding kicks in once the country suffers total terrorism-related losses in excess of $100 million in any given year.
Before the backstop kicks in, individual events must be certified as acts of terror by the Secretary of State, the Treasury Secretary and the U.S. Attorney General.
The insurance industry has come out in support of all three bills, saying TRIPRA is an important part of the country's safeguards against the economic impact of terrorism. The program has been in the spotlight recently, following the April 15 bombing of the Boston Marathon.
While President Obama has called the Boston Marathon bombing an act of terror, no federal agency has certified the Boston Marathon bombing as an act of terror for purposes of terrorism insurance policies. Without certification, losses will be covered under the terms of typical property insurance policies purchased by businesses in Boston.
Jimi Grande, senior vice president of federal and political affairs for the National Association of Mutual Insurance Companies, said in a statement that TRIPRA has been an "unmitigated success" and should not be allowed to expire. The program serves an important function, Grande said, because information regarding prior potential losses is kept classified, making it "virtually impossible" for insurers to account for risks properly.
"A tornado doesn't change its path to find the weakest building, and a hurricane doesn't make landfall based on the preparedness of communities along the shore," Grande said. "Terrorists can and will seek to strike at the places where we are most vulnerable however, and as we improve security in one area, they simply target another."
Leigh Ann Pusey, president and chief executive officer of the American Insurance Association, said in a statement, "In the years since Sept. 11, 2001, the program has provided much needed market stability and predictability for an orderly recovery after an event. The [Capuano-King] bill protects taxpayers by requiring insurers to meet significant deductibles and includes a mandatory recoupment provision for federal dollars expended."
The Consumer Federation of America has come out against proposals to extend the Terrorism Risk Insurance Program. CFA has said the property/casualty insurance industry has more than enough surplus capital on hand to cover a terrorist attack on the scale of the one that took place on Sept. 11, 2001. The industry's capital surplus reached a record-high $586.9 billion in 2012, according to a report released by the Insurance Services Organization. CFA said that level of surplus is sufficient to cover a large-scale terrorist attack.