The Fed's latest news has prompted another round of what-ifs.
WASHINGTON, Feb. 6 -- Rep. Michael G. Grimm, R-N.Y. (11th CD), issued the following news release:
Reps. Michael Grimm (R-NY), Carolyn Maloney (D-NY), Pete Sessions (R-TX), Andre Carson (D-IN), Peter King (R-NY), Gregory Meeks (D-NY), Dennis Ross (R-FL), Timothy Bishop (D-NY), and Carolyn McCarthy (D-NY) introduce the TRIA Reauthorization Act of 2013 to extend the Terrorism Risk Insurance Program for five years, through December 31, 2019. TRIA was first authorized in 2002, and is scheduled to expire on December 31, 2014.
"New York City remains the number one terror target in the country, which is why it is imperative to be prepared should we face another tragic attack. TRIA establishes a critical public-private partnership whereby the federal government creates a backstop for private insurers on terrorism related losses. If TRIA expires, not only will we expose our nation to great financial risk, we could see the availability of terrorism insurance diminish. It would be irresponsible to allow TRIA to lapse, which is why I introduced the TRIA Reauthorization Act to extend this vital program for another five years," said Rep. Grimm.
"New York City remains a top target for terrorists and TRIA is absolutely essential to the city's economic well-being. A five year extension of TRIA will to ensure that that the program will remain the backstop it has been since it was created in 2002 and allow investment in our city to continue without interruption. I look forward to working with my colleagues to ensure that Congress continues this vital program," said Rep. Carolyn Maloney
"After years of working in counterterrorism, I fully recognize not only the risk of a terrorist attack, but the significant economic impact it could have on communities across the country. TRIA is critical as we continue to combat terror around the world, ensuring that victims can focus on what really matters--caring for those impacted and rebuilding their lives--instead of worrying about how to cover the costs of damage. I am proud to join with this bipartisan group to introduce the TRIA Reauthorization Act and ensure there is no lapse in coverage for communities, businesses or families that could be hurt by an act of terrorism," said Rep. Carson.
"TRIA is essential to stabilizing the market for terrorism risk insurance and has provided certainty for New York businesses operating in an unfortunate era of terrorist threats. While the current authorization expires in 2014, it is my hope the Congress does not wait until the deadline to reauthorize this vital program," said Rep. Meeks.
"Through TRIA, the federal government has demonstrated it can play a positive role in spurring necessary, private market insurance. I am a cosponsor of this legislation because I believe these kinds of backstops are one of the best ways to protect the taxpayer from bailouts and encourage communities at risk to take steps needed to protect against future insurance claims," said Rep. Ross.
"I am proud to be an original cosponsor of the Terrorism Risk Insurance Act to provide a system of shared public and private compensation for insured losses resulting from acts of terrorism. This legislation is critically important to ensure that construction projects, lending, and other activities vital to our continuing recovery will not be jeopardized," said Rep. Bishop.
"At almost no cost to the taxpayer, the national terrorism insurance program has made it possible for more than a decade for businesses to purchase terrorism risk coverage. Having a federal terrorism insurance public/private risk sharing partnership in place in advance ...allows for the timely and orderly payout of claims to the victims of terrorism after an attack, thereby reducing or eliminating ultimate taxpayer exposure and minimizing the economic fallout from the next terrorist attack. CIAT wholeheartedly endorses your efforts to extend this vital terrorism insurance program beyond December 31, 2014," stated in a letter from the Coalition to Insure Against Terrorism.
Before the terrorist attacks of September 11, 2001, terrorism coverage was included in general insurance policies. After September 11th, terrorism insurance became very expensive, or unavailable. Congress responded by passing the Terrorism Risk Insurance Act (TRIA) of 2002 which created the Terrorism Insurance Program - a program in which the government would share some of the losses with private insurance in the event of another attack.
An individual act of terrorism must be certified jointly by the Secretary of the Treasury, Secretary of State, and Attorney General, and losses must exceed $5 million. The federal government shares in an insurer's losses only if the insurance industry's aggregate insured losses from certified acts of terrorism exceed $100 million, throughout the entire industry. The amount of the government share varies depending on the size of uninsured losses.
Each insurer is responsible for paying out a certain amount in claims--known as its deductible--before receiving federal coverage. An insurer's deductible is proportionate to its size, equaling 20% of an insurer's annual direct earned premiums for TRIA-covered lines of insurance. Once the $100 million aggregate loss threshold and 20% deductible are passed, the federal government is to cover 85% of each insurer's losses above its deductible up until the amount of losses totals $100 billion. The $100 billion figure is total losses not just federal assistance.
In addition, TRIA contains important taxpayer protections. In the event of government losses due to an act of terrorism the Treasury is able to recoup losses by applying a surcharge to future insurance premiums to repay these losses over time.
If TRIA were to lapse at the end of 2014 billions, possibly trillions, in commercial loans that are required to have terrorism insurance would be in technical default and could be called in, creating a massive financial and economic disruption.
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