The Terrorism Risk Insurance Act (TRIA), passed in 2002, fourteen months after September 11, 2001, is a federal public-private partnership, designed as a financial backstop in the case of a major terrorist attack, that places the responsibility for financial recovery on the private sector in all but the most catastrophic of events. The current bill, extended in 2005 and 2007, is set to expire on December 31.
Lenders require terrorism insurance in order to approve or enter into financing arrangements with many New York businesses. TRIA has created the needed predictability and stability in these markets to ensure that such insurance is available without significantly burdening the taxpayer. Economic losses would have to exceed roughly $30 billion before the government’s reinsurance would even be triggered. Further, TRIA requires the government to recoup any taxpayer money it spends on the first $27.5 billion of terrorism losses and allows the government to recoup losses up to the program’s $100 billion cap.
TRIA is especially important to the viability of the workers’ compensation market and any expiration would prove extremely problematic. Unlike other insurances, workers’ compensation statutes narrowly define the terms of coverage and offer insurers little flexibility in controlling terrorism exposure through modifications in coverage. Without TRIA, insurance carriers’ only option for limiting their terrorism risk exposure would be declining coverage to employers facing high terrorism risk. Employers in higher-risk areas, like New York City, would be forced to obtain coverage in markets of last resort.
The Senate passed its version of a reauthorization in July. The House TRIA bill, H.R. 4871, has never been taken up for a vote by the full House. Congress is expected to be out of session until after the mid-term elections, leaving little time, in a lame-duck session, to take action on reauthorization. TRIA is an imperative for employers in New York and the economy of the nation as a whole. The business community must demand that Congress act to continue this essential program.