In a few short weeks, after voters have gone to the polls, the current Congress will return to Washington D.C. 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 Years 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, where most attacks had occurred — projects in 17 states were impacted.
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.
The fact of the matter is, TRIA is a public-private partnership to safeguard the availability of commercial terrorism insurance. It is not a corporate give-away or a subsidy, nor is it a mechanism for supplanting the private sector in the insurance marketplace.
TRIA was reauthorized in 2005 and again in 2007, with some minor modifications. But without Congressional action, TRIA will expire on Dec. 31, 2014. 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 “[e]liminating TRIA could increase federal spending by $1.5 billion to $7 billion for terrorist attacks with losses ranging from $14 billion to $26 billion” because direct federal disaster assistance would take the place of a government backstop.
As such, it is absolutely critical that Congress reauthorize TRIA for as long as possible, with as few changes as possible. Private business, real estate agents, economic development companies, and insurers need certainty for the long-term.
The New England Council appreciates the efforts of Rep. Michael Capuano (D-MA), who last year introduced legislation to extend TRIA for 10 years, as well as Sens. Elizabeth Warren (D-MA) and Jack Reed (D-RI), both of whom voted for a responsible seven-year reauthorization bill in the Senate Banking Committee earlier this year. The Council believes that a multi-year reauthorization with minimal changes — in the fashion of these bills — best suits the needs of all parties involved.
Terrorism risk insurance is something that nobody wants but that everybody needs. As Rep. Capuano stated before the House Committee on Financial Services when discussing his bill last year, “TRIA is not perfect. It is not ideal. But it is the best solution we have.”
Fortunately, we have not been forced to make use of this backstop thus far. But with the constant threat of terrorism across the country — consider a 2010 Heritage Foundation study, which found that one-third of foiled post-9/11 terrorist plots in the United States have been outside large cities — we cannot take this important program for granted. We simply cannot afford to witness the results of a terrorist attack without TRIA in place.
It’s time for Congress to pass legislation to reauthorize TRIA and provide certainty to the American people that, in the case of a terrorist strike, the government stands prepared to help the economy recover.
James T. Brett is the president and CEO of The New England Council, a non-partisan alliance of businesses, academic and health institutions, and public and private organizations throughout New England formed to promote economic growth.