Set to Expire: The Terrorism Risk Insurance Program Reauthorization Act

November 24, 2014

The Terrorism Risk Insurance Program Reauthorization Act (TRIA), a federal backstop that provides a mechanism for losses that result from acts of terrorism, is set to expire on December 31 of this year unless it’s extended by Congress. If an extension were not to occur it could have an adverse effect on future economic development.

What is TRIA?
A little over one year after the 9/11 terrorist attack, President George W. Bush signed into law TRIA so the government could provide assistance should a similar event occur again in the future. The Act was only supposed to last three years but it has been extended twice and is now set to expire at the end of this year.

Potential Economic and Insurance Implications
As the economy is improving more and more, real estate and construction projects are underway. On my way to work every morning, I see high-rise buildings being built in Center City Philadelphia all the time. It seems every week brings news of some new project that’s being worked on or in development. However, what some people may not realize is that many projects such as these, which are being constructed in a densely-populated area, require TRIA coverage in order to secure financing. Therefore, if TRIA isn’t extended, it could stall projects (as it did after 9/11) and hurt the economy in Philadelphia, as well as other cities across the nation.

If TRIA does not get extended, the insurance industry is not prepared to provide this kind of coverage on a broad basis. What this means is there would be an increase in demand and a limited supply, which would affect availability and price for this kind of coverage.

Will TRIA Be Extended?
In late July, the Senate voted 93-4 to extend TRIA. Now it has to go through the House of Representatives to get extended. The likelihood that Congress will extend TRIA during this lame-duck session is high. But the end of the year is coming quickly, so it will be a race to finish line for them to do so. What will be most interesting is seeing how the Act is modified and what this means for the insurance industry as well as for businesses going forward.