On September 11, 2012, Linda St. Peter, Operations Manager for Prudential Connecticut Realty in Wallingford, CT, testified on behalf of NAR at the House Financial Services Subcommittee on Insurance, Housing, and Community Opportunity hearing on "TRIA at Ten Years: The Future of the Terrorism Risk Insurance Program." In her testimony (attached), Ms. St. Peter urged Congress to extend the Terrorism Risk Insurance Act (TRIA) beyond its current December 2014 authorization to ensure that adequate insurance coverage is available for our nation's businesses.
Following the Sept. 11 attacks private insurers backed out of the terrorism insurance marketplace prompting Congress to enact TRIA in 2002, a federal insurance backstop that allows the federal government and private insurance companies to share losses in the event of a major terrorist attack. The program has since been reauthorized by Congress twice – in 2005 and 2007. TRIA helped stabilize commercial real estate markets by making terrorism coverage available and more affordable over time.
While the cost and availability of terrorism insurance has generally improved, currently there is concern that the uncertain future of TRIA may cause insurance prices to fluctuate and prompt insurers to drop coverage. This became evident in both 2005 and 2007 when private insurers became reluctant to offer terrorism coverage due to the uncertainty regarding the program's extension. Ultimately, the uncertainty of insurance pricing impacts the net operating income of businesses and property values. The potential unavailability of terrorism coverage could impact financing agreements and potentially hurt the fragile commercial real estate recovery.
Yesterday's hearing is just the first step in a much longer journey to extend the federal government's role in the terrorism risk insurance market. Despite our successful legislative efforts in 2002, 2005 and 2007, and the fact that terrorism remains a clear and present danger, most anticipate this next effort to extend a federal program will be the most challenging. While the program does not sunset until 2014, efforts to reauthorize the federal program will begin in earnest in 2013.