Trying to ensure that New York City businesses remain protected financially from potential terrorist attacks, members of the House of Representatives have introduced a bill to extend risk protection another five years.
H.R. 508 or ‘The TRIA Reauthorization Act of 2013’ would continue the federal program where the government would shoulder some losses sustained by businesses in the event of an attack.
“New York City remains the number one terror target in the country,” said Brooklyn and Staten Island Congressman Michael Grimm (R-NY-11) the main sponsor of the 2013 bill.
“It is imperative to be prepared should we face another tragic attack. TRIA establishes a critical public-private partnership whereby the federal government creates a backstop for private insurers on terrorism related losses.
“If TRIA expires, not only will we expose our nation to great financial risk, we could see the availability of terrorism insurance diminish,” he said.
The original bill, passed in 2002, was the result of private terrorism insurance becoming too expensive for businesses to bear. It has been renewed twice before, in 2005 and 2007, but will expire on December 31, 2014 if not extended again.
The new reauthorization act would prolong the program until at least December 31, 2019. “TRIA is absolutely essential to the city’s economic well-being,” said Congresswomen Carolyn Maloney (D-NY-12). “A five year extension of TRIA will ensure that the program will remain the backstop it has been and allow investment in our city to continue without interruption.”
One of the intentions of the bill was to create a subsidized mechanism to prod private insurers into offering terrorism insurance. Because insurers faced no up-front costs, prices have remained at reachable levels. But at a House subcommittee in September of last year, Erwann O. Michel-Kerjan of The Wharton School testified that although he felt the terrorism insurance market would survive without the federal subsidy, prices could rise without it, causing more companies to not have coverage at all.
TRIA, Michel-Kerjan said, could limit liabilities, especially if no attacks were sustained. Its expiration however, could also mean that insurance companies would make any protections unavailable, causing taxpayers more in the end should there be an attack.
“A world without TRIA might not necessarily be one with less risk to the federal government and the American taxpayers,” Michel-Kerjan said to the subcommittee at the time. “If TRIA expires, unless reinsurers re-entered the U.S. market at a price considered reasonable, most primary carriers are going to exclude this risk from their portfolio everywhere they can.”