With the midterm elections over, Congress is back in Washington to finish a few “must-do” items before the end of the year. One of its most important pending actions is to extend the Terrorism Risk Insurance Act, or TRIA. While this may not have been 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 in the United States.
Following the Sept. 11, 2001 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, more than $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, D.C., where most of the 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 TRIA in 2002. It 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 would not come to a screeching halt.
TRIA was reauthorized in 2005 and again in 2007, with minor modifications. But without Congressional action, TRIA will expire 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.” Also, the RAND Corp. 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’s 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.
Terrorism risk insurance is something that nobody wants but that everybody needs. With the constant threat of terrorism, we cannot take this important program for granted.
It’s time for Congress to pass legislation to reauthorize TRIA and provide certainty to the American people that, in the event of a terrorist strike, the government stands prepared to help the economy recover.
James T. Brett is president and CEO of The New England Council, a nonpartisan alliance of businesses, academic and health institutions, and public and private organizations throughout New England