TRIA Extension - What's it all about?
The following is an extract from an article entitled "Keeping a Legal Eye Out" in this month's Captive and ART Review.
By the time you read this, the Terrorism Risk Insurance Act (TRIA) should either have been extended or expired. While many captive owners and insurance company executives hope for the former, for the White House the latter may be preferable. As Captive and ART Review went to press, pressure was being built to get Congress to do something-anything-to extend TRIA which as coming up for expiry on 31 December. TRIA offers federally funded coverage for terrorism risks above a certain deductible. Between 3% and 8% of US captives access TRIA for their owners' terrorism coverage.
In November 28 US state governors signed a letter to the leaders of the US senate and House of Representatives urging Congress to consider a temporary extension to TRIA that ultimately would lead to a viable long-term solution. Among the governors to sign the letter were those from New York, California, Nevada, Florida (the President's brother Jeb Bush) and Vermont.)
"In the wake of the attacks of 9/11, the TRIA programme proved critical to our nation's economic recovery," says the letter. Now, less than two months between scheduled expiration, we urge you to act quickly and ensure our businesses can continue to be protected against the threat of terrorist attacks," it continues.
The governors add if a federal terrorism insurance backstop is not continued in some form, business will face market conditions similar to those experienced after 9/11. Policyholders will pay exorbitant premiums for terrorist insurance or may be unable to secure it.
In the absence of any financial protection, the governors add: "A future terrorist attack will have a significant impact on our nation's ability to recover as businesses find themselves without the necessary resources to rebuild their operations." "In addition, without a backstop, the US will find itself at a competitive disadvantage against countries with a terrorism insurance programme, such as the UK or Germany, when attempting to attract international private investment." The governors urge Congress to consider a temporary extension that ultimately would lead to a viable long-term solution. "The primary beneficiaries of TRIA-policyholders deserve the certainty a long-term solution would provide, "the letter concludes.
Meanwhile, the American Insurance Association (AIA) representing 435 US insurance companies has called for immediate action to extend TRIA. While a House of Representatives committee was reviewing the nation's preparedness against bio terrorist attacks, the AIA urged legislators not to overlook the ever-present risk that terrorist attacks pose to the US economy-a risk that could be compounded without TRIA.
"Terrorism insurance is crucial to compensating victims, sustaining business operations during a disruption and rebuilding damaged infrastructure," says Leigh Pusey, senior vice-president of government affairs for the AIA. "Without the public/private mechanism in place, the possibility of widespread dysfunction in the US economy becomes very real, as insurance against terrorist acts becomes prohibitively expensive or disappears entirely," he adds.
