What is the fundamental issue?
Congress must continue to reauthorize the Terrorism Risk Insurance Act (TRIA) program to ensure access to affordable coverage for commercial property/casualty lines. TRIA is next set to expire at the end of 2027.
I am a real estate professional. What does this mean for my business?
American businesses continue to rely upon the availability and affordability of terrorism risk insurance. The federal backstop program is a critical component of the private/public partnership created to protect the nation's business sector by ensuring that adequate insurance coverage is available to effectively manage economic risks. This has been a particular concern for those in commercial real estate who need to have terrorism coverage in place in order to secure financing. Commercial mortgage-backed security (CMBS) borrowers face the threat of default and bond downgrades without adequate coverage. In the retail and multifamily sectors specifically, a jump in terrorism insurance premiums can reduce the value of commercial properties. If terrorism insurance becomes unavailable, this throws the financing into technical default.
Supports the continued availability and affordability of terrorism risk insurance coverage under the TRIA program.
The Terrorism Risk Insurance Act (TRIA) program must be reauthorized before Dec. 31, 2027.
On December 17, 2019, the House of Representatives passed H.R. 1865, a year-end spending bill which included provisions to reauthorize TRIA for 7 years (through 2027). On December 19, the Senate did the same. H.R. 1865 makes no changes to the TRIA program other than requiring a GAO study on cyber-terrorism.
Following a brief lapse in Congressional authority in 2015, the program was extended for 6 years (through 2020) with several structural changes. Changes included raising from $100 to $200 million the amount of losses before the federal backstop is "triggered"; decreasing the government's share of the losses above that point from 85% to 80%; and increasing the mandatory recoupment amount from $27.5 to $37.5 billion.
As part of the reauthorization, several government studies were commissioned on terrorism risk insurance. The CBO released a study on the TRIA program, examining its history, how the current program works, its effects on insurance markets, and policy options for the future. The Treasury Department also conducted several studies and reports to Congress that were favorable to the program.