Senate: Terrorism Risk Help for CRE Industry

On July 17, the Senate passed the Terrorism Risk Insurance Program Reauthorization Act of 2014, extending the original Terrorism Risk Insurance Act (TRIA)—enacted in 2002 following the events of 9/11—for an additional seven years. Many CRE industry participants have been advocating for an extension of TRIA in order to provide clarity and stability with respect to terrorism risks.

Passage of TRIA stabilized the post-9/11 insurance market, helping improve the construction, real estate, and finance segments of the economy. Some real estate experts say that without the government reinsurance provided under TRIA, terrorism coverage is either impossible to obtain for some owners or prohibitively expensive. TRIA was extended in 2005 for two years, and then in 2007 for a seven-year period. It expires at the end of 2014, which has lawmakers and other supporters of TRIA taking action.

There are a few substantive differences between the language of the original TRIA legislation and the current extension bill. In particular, the co-pay for insurers before government funding is triggered has been raised from 15 percent to 20 percent, and mandatory recoupment has been elevated from $27.5 billion to $37.5 billion, to be phased in over the next five years.

In addition, the bill calls for the establishment of the National Association of Registered Agents and Brokers (NARAB), as well as the establishment of an advisory committee that would investigate means to roll back the government’s involvement in terrorism and risk insurance. The House currently has its own version of a TRIA extension bill under consideration. While that version also includes the establishment of the NARAB, it proposes only a five-year extension. Limiting coverage to nuclear, biological, chemical, and radiation risks is also being considered.