WASHINGTON, Feb. 6, 2013 /PRNewswire-USNewswire/ -- The Real Estate Roundtable today commended Rep. Michael Grimm (R-NY) and other representatives for introducing bipartisan legislation to extend the nation's terrorism risk insurance program until year-end 2019 – a first step toward ensuring continued access to credit for commercial property owners and ensuring that the U.S. economy will continue to function in the wake of a major terrorist attack.
"Terrorism continues to pose a threat to our nation, to American businesses and to real estate, which houses America's economy," said Roundtable President and CEO Jeffrey D. DeBoer. "Without adequate terrorism insurance coverage, our economy, jobs, and well-being become more vulnerable to the designs of terrorists who hope to destroy our economic strength."
Rep. Grimm's bill, the "Terrorism Risk Insurance Act of 2002 Reauthorization Act of 2013," is co-sponsored by Reps. 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).
The TRIA reauthorization bill is necessary to address the scheduled expiration of the current terrorism insurance backstop at year-end 2014. Unless there is an active reinsurance marketplace, direct property insurance carriers will not provide terrorism coverage to businesses – as was the case immediately following the 9/11 attacks. Since a viable private sector marketplace for this coverage does not yet fully exist, TRIA's expiration would leave policyholders and taxpayers exposed and unprotected – just as they were after 9/11.
Given the continuing difficulty of modeling terrorism risk and accurately predicting potential strikes, reinsurers remain unwilling to provide such reinsurance, and therefore the private marketplace for terrorism insurance remains broken. The Government Accountability Office (GAO), President's Working Group on Financial Markets and other terrorism risk observers have consistently concluded that "acts of terrorism" are uninsurable risks. (See references below.)
"It is important to have an effective, long-term, terrorism insurance mechanism that provides adequate market capacity for the U.S. economy and the safety that markets require," DeBoer asserted.
"The continuation of the terrorism risk insurance program is critical to our nation's economic security. At almost no cost to the taxpayer, the national terrorism insurance program authorized by TRIA in 2002 (and its subsequent extensions) has for more than a decade enabled businesses to purchase terrorism risk coverage."
Expiration of the national terrorism insurance program could result in delaying the economic recovery that has yet to really take hold – particularly for construction workers in a sector with one of the highest unemployment rates in the U.S. economy.
The attacks of Sept. 11, 2001 had a profound economic impact – resulting in the loss of a million jobs; the delay or cancellation of $15 billion in real estate transactions; and a six-year low in commercial construction. In the immediate aftermath of 9/11, the absence of terrorism risk insurance contributed to a paralysis in the economy, especially in construction, tourism, business travel and real estate finance.
Enactment of the Terrorism Risk Insurance Act of 2002 (TRIA) ensured that terrorism risk coverage was widely available to commercial policyholders, and delivered through a private insurance mechanism that retains the private industry's "skin in the game" through insurer-deductible and co-share layers. It also protects taxpayers by providing recoupment – from commercial policyholders – of any federal share paid out in the wake of a large-scale terrorist event.
Terrorism Risk Insurance: Report of the President's Working Group on Financial Markets, September 2006, p.12 – http://www.treasury.gov/resource-center/fin-mkts/Documents/report.pdf
Terrorism Insurance: Measuring and Predicting Losses from Unconventional Weapons Is Difficult, but Some Industry Exposure Exists, United States Government Accountability Office, September 2006, p. 4. – http://www.gao.gov/new.items/d061081.pdf
About The Real Estate Roundtable:
The Real Estate Roundtable brings together leaders of the nation's publicly-held and privately owned real estate ownership, development, lending and management firms with the leaders of national real estate trade associations to jointly address key national policy issues relating to real estate and the overall economy. Collectively, Roundtable members' portfolios contain over 5 billion square feet of office, retail and industrial properties; over 1.5 million apartment units; and in excess of 1.3 million hotel rooms. Participating trade associations represent more than 1.5 million people involved in virtually every aspect of the real estate business. www.rer.org
SOURCE Real Estate Roundtable