Congress is returning to Washington for a short time to finish a few “must-do” items before the close of the year. Chief among these priorities is a budget for the upcoming months, but several smaller pieces of legislation require passage before the ball drops on New Year’s Eve.
One of the most important actions that Congress must take in the eight weeks after Election Day is to extend the Terrorism Risk Insurance Act, or TRIA. While this may not be a hot topic on the campaign trail, failure to pass legislation that reauthorizes this critical program could have dire consequences in the event of a large-scale terror attack here in the United States.
Following the Sept. 11 terrorist attacks, businesses across the country struggled to access insurance against the risk of terrorism. Plans became costly or nonexistent, and there was a great deal of uncertainty in the economic development community.
The Real Estate Roundtable found that, in the year following the attacks, over $15.5 billion worth of real estate projects were either canceled or stalled due to the decline of available terrorism insurance. This phenomenon was not confined to New York and Washington — projects in 17 states were affected.
This scarcity of terrorism risk insurance — and the resulting economic consequences — spurred action on the part of Congress, which passed the original Terrorism Risk Insurance Act in 2002. TRIA acts as a government-backed stopgap in the case of a major terrorist attack. The fundamental goal behind TRIA is to ensure that businesses have access to terrorism insurance, so that in the event of an attack, construction projects can proceed, businesses of all sizes can remain open, and commerce does not come to a screeching halt.
TRIA was reauthorized in 2005 and again in 2007, with some minor modifications. But without Congressional action, TRIA will expire on Dec. 31. This would stunt progress that has been made since 2002 in ensuring a healthy terrorism insurance market.
Additionally, the consequences of inaction could be costly. A report from Marsh & McLennan finds that the result will be “increased pricing and limited capacity (for terrorism insurance), especially for risks in the central business districts of major cities.” The RAND Corporation found that eliminating “TRIA could increase federal spending by $1.5 billion to $7 billion for terrorists attacks with losses ranging from $14 billion to $26 billion” because direct federal disaster assistance would take the place of a government backstop.
Terrorism risk insurance is something that nobody wants but that everybody needs. With the constant threat of terrorism across the country, we cannot take this important program for granted.